S&P 500 SPDR in 3 Timeframes

What a day Thursday after a week of “What a day” comments all would be happy with a bounce or even flat day Friday. In some ways the market is set up for it. Selling continued through the close Thursday and the Non-Farm Payroll numbers expectations have been ratcheting down all week. So if we get a pop tomorrow can we all breathe a sigh of relief? The short answer is yes, after this week you should take a deep breath. But a deep look at the S&P 500 SPDR’s ($SPY) shows that you better get your rest this weekend to prepare for Monday. Let’s take a look.

S&P 500 SPDR’s, $SPY, Daily

On a daily chart the $SPY made a big statement Thursday not only not confirming the Hammer from Wednesday but printing a near Marubozu candle and the largest seen since the May 2010 Flash Crash. Trapped bulls will look at the fact that it is out of the Bollinger bands and the Relative Strength Index (RSI) under 25, as low as it has been on the daily since before the Mar 2009 lows, as hope for a snap back. And they may get it. If it does there is resistance higher at 121.05 followed by 121.50 and 122.30 before 123.50 and 125. A move lower sees support at 119.48 followed by 118.50 and 117.44 before the target on the Head and Shoulders top at least reaching 115. My money is on the trend continuing. On the weekly basis below the fall from the rising channel off of the March

S&P 500 SPDR’s, $SPY, Weekly

2009 lows and retest failure 5 weeks ago is clearly seen. It is also looking to print a Marubozu candle on the weekly with one day to go. This chart is also trending lower but not as limited in the downside as the daily with the RSI only at 37.37. The current level could be a logical halting point but it is very close to falling back to the 61.8% Fibonacci level at 114.14 just below the 100 week Simple Moving Average (SMA) at 116.35. It is also out of the lower Bollinger band so it may bounce, but all other indications are for the trend lower to continue. If it does bounce 123 is resistance followed by the previous channel at 126.30. Moving now to the Monthly timeframe in the chart below reveals a very bearish view. I know what you are saying, the Long red August candle

S&P 500 SPDR’s, $SPY, Monthly

only covers four days. But this is also why it is so bearish. It can move a full 8% higher for the rest of the month, up to 130 and still represent a bearish view on this timeframe. Of major interest on this timeframe is the Median Line f the bullish green Pitchfork is right at the 20 month SMA at 118.74 and they are both just above the 114.14 Fibonacci and the 50 month SMA at 113.21. All of this action is also near the Head and Shoulders target at 115 from above. With the RSI rolling over and still only at 51.88 on the monthly timeframe and the Moving Average Convergence Divergence (MACD) indicator approaching a bearish cross, this may just be getting started. At the very least the 115 Head and Shoulders target seems legitimate. Below the support mentioned there is further support on the monthly basis at 110 and then 104.51.

The market may bounce Friday or early next week, or any given day. This is supported in the short run from the daily and weekly charts. But in the longer term, the market appears to be ready for a lot more downside. Be prepared.

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