Thursday, July 14, 2011

Thursday Market Summary

Today's trading was very much reminiscent of yesterday's. The SPY opened just about flat then rallied and ultimately fell to make new lows on the day.

The take-away from this is that the market remains in an extremely weak position and will continue be this way until the US and EU debt crises get some kind of (temporary) resolution. Until that time, or until we're in a stronger technical position, it appears that every rally will be sold into.

From a daily chart perspective, today we came very close to my 20MA average target, which today is at approximately 131.63. I may regret not covering my short position there as sometimes a near hit is as good as an actual one, but I think this market remains weak so I'm not worried going forward into the next few days. Also, please note the bear flag that is potentially playing out based on the last 5 days of trading followed by today's down-move.

SPY daily bear flag breaking down?

Intraday, the SPY opened at 132.17--a huge recovery from the dump on the futures last night, which at one point was down over 10 points. From there, the SPY traded as high as 132.78 before falling all the way down to 130.68. After hitting these lows, the SPY got a big bounce back up as high as 131.70 and then all the way back down to 130.75 before chopping sideways for the rest of the day. The SPY closed the day at 130.93, down 0.69%.

Massive range on SPY 10 min chart

Something else of interest I'd like to point out here is the massive intraday ranges we're starting to see, while never closing that far away from the open. This ends up making what's known as doji candles on the daily chart and can make swing trading a position over several days somewhat frustrating. On the other hand, it makes for a fantastic day trading environment.

Tomorrow will be very telling as we'll have a better idea if this breakdown will persist or if the market will rally off of daily support levels into Friday and next week. Be sure to check back here and follow me on Twitter for my latest analysis. I expect to have some actionable levels and trade setups very soon.

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