SPDR S&P 500 ETF Drifts Lower Today on Meager Volume

The SPDR S&P 500 ETF today broke down today on 35% greater volume than yesterday although still relatively lower volume as compared to other break downs in recent months.

Today the SPY candle engulfed yesterday’s doji candlestick on 35% greater volume.  On the Dow Diamonds DIA SPDR Dow Jones Industrial Average ETF today we engulfed yesterday’s near perfect doji on 55% greater volume.

This bearish engulfing setup is somewhat similar to the one that occurred on 6/21/2010 except that today’s engulfing has a slightly more bearish volume characteristic.

Despite these short term signals the fact still remains right now that the SPDR S&P 500 ETF is still trading both above the red dotted down trend line that has defined the bear phase and also above the near term green up trendline since July 1, 2010.

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These two facts make it hard to be super bearish right now despite the near term signals of a possible turn down in the market right here.  It looks like the GDP report tomorrow is going to swing this market in a decisive direction.

I mentioned in yesterday’s post that the 1100 level on the sp500 was minor support and ideally for the bearish case would close near there or below it by end of this week.  That type of close would set up a nice weekly hammer reversal candlestick and give a good shot at next week being hard down.  Breaking below the 1100 level enough on the sp500 could help to accelerate selling a bit and also create a 2B sell signal.  But again, unless we start trading seriously below the 109 level on the SPDR S&P 500 ETF then I have to conclude that the bulls still have some steam left.

Breaking and staying below the 109 level next week would really start to help firm up my conviction on the bearish side.  Right now I see clues of a momentum shift down again and possible chance of a break down tomorrow but I am still sort of 50/50 right here.  The market still has the potential to be supported by the recent uptrend and even get a test of the 6/21/2010 swing high.  It would be much better for the bearish case if the high of two days ago is the final high and remains as a lower high relative to the 6/21/2010 high.

The stock market astrologers have really raised the bar for the next few weeks of August.  Starting on July 31st and then the first week of August some very supposedly negative aspects are going to start kicking in.

They have placed a heavy emphasis on this time period and have even talked about this time period as one that will be remembered as ‘a news item for the century’, or one that will be referred to for a long time (Larry Pesavento).  Both Arch Crawford and Larry Pesavento in recent days have been pushing their stance on these astro aspects heavily.

But I can tell you with zero doubt, that if the 109 level in the SPY ETF is not broken down through in the next week then all these Astro predictions are not going to hold any water at all.  I have to limit the time duration to about 6 trading days because there is not that much room between now and the green uptrendline.  Any time duration after 6 days is either going to lead to a big upmove breakout or a downside breakdown.

If we take out 112.29 7/27/2010 swing high in the spy ETF in the days ahead then the only remaining validity to the Astro aspect for me is that there will be a mid August high.  But the problem with that is it will create a market that has made a higher high in relation to the 6/21 swing high and also show a market that is retracing deeply higher into its bear market since April 2010.  Plus a higher high than 6/21 on the SPY ETF could mean a break out type run in the Semiconductor HOLDRs (ETF) that would put it above its large trading range.

So there are some mixed signals as of today’s tape.  Bias for me is still for more downside action and ideally tomorrow will be hard down to set up next week.

Posted in ETFS, Market Timing, Online Trading, Technical Analysis
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