Two Updates, Downside is Coming (1 of 2): SPY
Updated
I haven't produced any updates in a few days because not much has been happening, and I've had little to report. The market continues to drift sideways and up. There is not a lot of structure on the chart, no obvious pattern to discern at the moment. Do we have a triple top? Maybe. Mostly it's just a trading range.
I do have a few things to mention.
1) Until large, institutional sellers come to the game, we will just have to wait. The only activity that is going on right now is algos and retail. That's it. Algos sniff out the last of the FOMO crowd, and buy before them, then sell them what they just bought. And then the algos will buy all the stocks in an index to keep it on par with the futures market. That's about all that is happening right now. This is not institutional buying or anything like that. The algos are so good at sniffing out institutional selling, that they will simply keep nosing the stocks up, which causes short sellers to cover, making them become buyers, thus lifting the very stocks the algos bought in the first place. That's how they make money. So, that game is going to keep going until the big money decides to take profits and exit the market. And when the algos sniff that out, they too, will dump what they've been accumulating.
2) Note the volume bar(s) (red arrows). Today was the lowest volume on the SPY since the last green day before the crash (Feb. 19th). I hope that means the next wave down is imminent.
3) Note the 200-day simple moving average (orange line) and the little gap above us (purple box). That's as good a place as any for the institutions to start dumping, but I do believe it could come at any moment.
4) I would not be surprised to see a short squeeze if they can push the markets up above the 200-day SMA for any considerable amount of time. If that does happen, I expect the markets to move precipitately down from there.
5) I will be posting a short note on the VIX later tonight.
I do have a few things to mention.
1) Until large, institutional sellers come to the game, we will just have to wait. The only activity that is going on right now is algos and retail. That's it. Algos sniff out the last of the FOMO crowd, and buy before them, then sell them what they just bought. And then the algos will buy all the stocks in an index to keep it on par with the futures market. That's about all that is happening right now. This is not institutional buying or anything like that. The algos are so good at sniffing out institutional selling, that they will simply keep nosing the stocks up, which causes short sellers to cover, making them become buyers, thus lifting the very stocks the algos bought in the first place. That's how they make money. So, that game is going to keep going until the big money decides to take profits and exit the market. And when the algos sniff that out, they too, will dump what they've been accumulating.
2) Note the volume bar(s) (red arrows). Today was the lowest volume on the SPY since the last green day before the crash (Feb. 19th). I hope that means the next wave down is imminent.
3) Note the 200-day simple moving average (orange line) and the little gap above us (purple box). That's as good a place as any for the institutions to start dumping, but I do believe it could come at any moment.
4) I would not be surprised to see a short squeeze if they can push the markets up above the 200-day SMA for any considerable amount of time. If that does happen, I expect the markets to move precipitately down from there.
5) I will be posting a short note on the VIX later tonight.
Comment
I need to make one correction regarding point #2: this was not the lowest volume since February 19th. I looked at the wrong number.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.