If you're entering a parlor with the SPY, are you the spider or the fly? - ChartsEdge map for 7/30 and some comments I'm adding

ChartsEdge Market Map for Jul30

Posted: July 30th, 2009
Author: Mike Korell
Filed under: One-Day Market Map
Comments to ChartsEdge »
»





=============

Thanks once again, Mike and ChartsEdge!

Folks, some comments of my own ...
If the S&P 500 (SPX) along with the popular exchange-traded fund SPY are entering just a bit further into a Fibonacci retracement area, at the same time that Elliott Wavers are counting hourly chart movements for when a fifth wave is complete - then will you be the spider or the fly in that ancient little poem: "Come into my parlor", said the spider to the fly ...! The point is to remember that what looks like good price movement this week can be part of a wave or cycle crest that's losing momentum, so by all means play it according to what works for your time frame and trading style ... but make sure you don't get caught on the wrong side of the trade. Yesterday my tweets included pointing out that the SPX was again testing numbers like 972, 977 and 982. Maybe we'll see it test 992 - remember, the ChartsEdge weekly forecast (use the "Chartsedge weekly" label to locate easily) indicated as much in showing movement upward into today (Thursday) this week. You can see significant Fibonacci levels which I'm referring to, in my weekly SPX chart at right.

I'd tweeted yesterday that some aggressive speculators were already trying trades to short the market, and it looked intraday as if the SPX might indeed be ready to give up 972. I also tweeted that under 962 is where the brear would be growling. Anyone trading these ideas had to TMAR during the day - which is exactly what daytraders must do anyway, of course - and sure enough, this morning it looks like the past couple of days' highs may be taken out. This fits well with the idea I've been suggesting for a number of days now, that the QQQQ's having come so far cannot really turn back without testing the $39.82 level that retraces 50% of the way back to their 2007 highs.

As I also mentioned in my post last night, it's premature to predict whether a turn down from overbought conditions after completion of a 5th wave will be only a pullback preceding another rally leg up, or become something more bearish. That's why even KI$$ swing traders may want to consider locking in some profits once there's been confirmation of a significant interim top being put in, based on Fibonacci levels, wave count (completing a 5th wave of this movement), indicators and chart pattern triggers. Don't get me wrong - Tony Caldaro for example stated in his update yesterday that he'll be marking a pullback as a "b" wave indicating that there should be another rally leg up afterward. I'm just pointing out that there isn't a guarantee.

Below are my monthly SPX chart, and the NYSE McClellan chart (courtesy of DecisionPoint.com via Stockcharts.com, both in the links at right). I've had a bit of fun again with marking lines onto the McClellan chart, especially as the Oscillator not surprisingly turned back from my newer top downtrend line, showing some negative divergence for this last bit of the move up. The StochRSI on the monthly chart does look good, so this does give some promise that after a pullback we may indeed see another rally leg up (just so my readers understand, I'm choosing my words deliberately when I say "we may see" it).