mbrennan

S&P Update, Market Transitioning into Trading Range

AMEX:SPY   SPDR S&P 500 ETF
192 4 5
The buy climax and 39 moving average gap bar (small PB             ) bull trend is transitioning into a trading range, as the bears went for their breakout below. This is the biggest bar with a bear close since 2008.
  • The 13 month long tight trading range
  • The moving average (20 bar EMA)
  • The prior higher low
  • The tight bull channel trend line

Most likely is sideways to down price action over the next year, with a probable test of the all time high should we get a signficant downside swing. The major (lower) bull trend line is very likely to be tested, but this may occur by going sideways for a year or so.

Less likely, we get a strong bear spike selloff to test the bull trend line.

Bulls see this as the first demonstration of signficant selling pressure, as the bears are beginning to not only sell above resistance (limits orders) but selling below support (stop orders). Since the bulls are only willing to buy below and the bears are beginning to sell rallies, the market has transitioned into a trading range (tight range since November).

Support levels below are likely to find buyers and bears taking profits.
Killy_Mel
a year ago
good analysis... I also think that there is not much reason for a 50% discount in the markets - there is no crisis

although you are using 20 month average - why that number? it has not much sence
Reply
mbrennan PRO Killy_Mel
a year ago
On the 20 bar EMA - I interned with proprietary traders at GS a year ago and most of the computers and day traders used the 20 bar EMA, so its just conventional for me to use it as well.

No EMA is really more advantages than another. Each has its own way of being traded and interpreted.
+1 Reply
Killy_Mel mbrennan
a year ago
nice, congrats on such a great experience=)

I mean that 20 is most likely used on daily chart to calculate average price of the month
It also works for hourly chart on FX - calculating average price for the day (20 hours)

Then it became conventional use

My point is that the period you calculate - it rather have at least some sence to it... I myself use mostly 24 hours, 120 hours (week) - then 66 days (quarter) and 264 days (year) - and so on...
+2 Reply
mbrennan PRO Killy_Mel
a year ago
That makes sense. I don't think I've ever actually thought of it like that. I normally trade daily charts but just decided to keep it consistent with higher time frames. Thanks!
+2 Reply
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