Wednesday, February 28, 2007

SPY: Monthly Bearish Engulfment

First of all, I'd like to start this post by saying I am not a bear. If you've been reading my comments today and yesterday, you would know that I'm not sure which way this market is going to go. However, as the pieces of the puzzle come together, I will post my observations as the days go by. Hopefully, when enough of the puzzle is revealed to me, I will take my best guess if it's a bear or a bull I am looking at.

It's the end of the month and many traders forget to check the long term charts. You always want to check the monthly time frame at the close or beginning of each month.

If you look at the above chart of the SPY's you will see a monthly bearish engulfment. Notice where this engulfment has formed. It formed right at key resistance going back to March of 2000 which is the all time high. I think this is very significant and it's something to be aware of. Keep in mind the SPX is not at resistance yet. The DIA's also had a monthly bearish engulfment.

Does this mean I am bearish? I'm still not sure what to think here. The purpose of my blog is not only to post my opinions but I'd like to also post my observations as price structure unfolds. My cyclical work still says higher but this monthly bearish engulfment is something I'm going to have to consider and it does raise a red flag.


h. lovil said...

Kevin- it would be great if you could up-date some of your old Canadian Dollar or FXI and see if the bullish/ bearish stance still holds or not.

Kevin said...

Canadian Dollar I am still bullish on...FXI obviously was a disaster...No reason to be bullish on that.

Marcel said...


I have a question on the S&P 500 for you and what your thoughts are.

The S&P 500 should make another attempt at the high very soon. For the market to go down tomorrow, it will not shake any weak shorts out of the market. The way for the most people to lose money is for the SPY to go up tomorrow and squeeze the short positions, test a new high in a couple days, and then come back down into a trading range.

Isn't this what just happened with the QQQQ's? They are in a range after cowardly testing their high this year. I think most weak investors will lose money by a second sell off because they won't take profit at the next high. This sell off only brought in short sellers.

Also, I think lots of people were short the market or sitting with cash to buy.

I can't imagine all of those short sellers not panicking tomorrow if the market stays up above the 3pm - 4pm trading area from Tuesday.


Kevin said...

Hi Marcel,

Like I said on my blog, I'm really not sure which way this market is going to go. I can make an argument for either direction...I agree with you about shorts getting sqeezed here if the market doesn't follow through soon. I guess we'll just have to wait and see..

Sandro said...

The long-term chart must be rotated clockwise to offset dollar inflation.

We are currently well below 2000 top if you count in old dollars.

If the top is established today then we are in a long-term bear market, where new top is way lower than the previous one.

Anonymous said...

Hi Kevin
RE "cyclical work" looking at the Qs Isn't it time for the 48 week cycle to bottom somewhere here and the drop NYA50R seems to be on time.


Anonymous said...; You saved my day again.


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