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Running with the Bulls - A look at the SPY and Bull's Case

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October 11, 2011 – Comments (0) | RELATED TICKERS: SPY

For what I can count, the bulls did 4 good things to help their case today:

Here is a quick recap of what we saw in the market today and what we expect.  Today we pretty much had a trend day.  Market runs up quickly in the morning and begins to move sideways for the remainder of the day.  This a great thing if you are long from yesterday but if not then you are pretty much left on the sidelines.  Traders trying to go long (usually from boredom) typically get shaken out before the day is over.  It is also not a good time to short the market just because things are getting lifted up to extreme levels.  Shorting is usually better the days following.  Today's close where we zoomed lower and the rocketed higher is the only part of today that stands out.

Here's the Chart Annotations for SPY

1. We pushed over the 50 day moving average.  This is the first time we've been able to do that since the sell off.  We have tried several times in the past but always quickly sold off before breaking through.

2. We have killed the series of higher-lows and lower-lows.  The best way to tell a trend (in any timeframe) is by spotting higher-highs/higher-lows or lower-highs/lower-lows.  We have been in a downtrend marked by the grey circles around the lower-highs and lower-lows.  Today we broke above the previous lower-high and killed the series.  We now have a chance to make another series.

Here's SPY 5min Chart

3. On the SPY (5min chart - pictured above) the purple circle marks our break through the 50 day moving average and the slight retest.  As you can see the test of the 50 day moving average was quickly bought up and the market zoomed higher.  If we come back to retest the 50 day moving average on the daily chart I believe it too will be bought up.

4.  The VIX reacted positively to the push higher.  Not only did the VIX fall but more importantly the VIX implied volatilies really fell.  This shows that people are not buying protection for this market.

Right now we are still in a range bound market and will continue to be until we break 123.51 or 110.27 (on the SPY).  Continue to play the range by selling at the top and buying at the bottom.

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