Interesting Fast SPY Chart

I find this fast 10 day 15 minute chart fascinating:

SPY vs RUT GLD TLT 10 day 15 minute

SPY vs RUT GLD TLT 10 day 15 minute

Live Version

Prices are just sliding down that SMA line ( roughly the 50 period, or 12.5 hour line). Volume yesterday had a drift down while prices were up the start of the day, then volume increased as prices fell (so going down more). Today price is dropping and volume is dropping to match. Implying a rise into the close. But the Talking Heads are talking about margin calls likely at 2 PM ET from the Friday drop. Yet looking at GLD and TLT, the “risk off” assets are being sold down. Money is flowing from the Risk Off trade “somewhere”. It might be margin calls, or it might be buying stocks.

So my best guess on this is that the safe havens are fading and someone is buying stocks with the money (or at worst, not meeting margin calls with stock selling but with bonds and gold). MACD, DMI and PSAR have not yet said “buy”, but that could happen quickly on this time scale chart. Also notice that at the 10% down line, we seem to have a hard floor under prices even on major panic days.

All this is what I call “wedging in”. There is a narrowing wedge and when you reach the tip of the triangle “something gives”. The usual resolution is away from the direction of drift (presently down) so would argue for an upside move about 2:30 ET (and more upside tomorrow given the ‘floor’ aspect and how volume is dying to the downside).

At least, that’s what the chart says to me. We’ll see tomorrow ;-) The major worry point just being that volume often dips mid day so that downward slope might be wishful thinking (it will be more clear after lunch at about 2 PM ET) and the peaks of the Market Close 1/2 hour volume on down prices IS rising (a lot of mutual fund folks still bailing at the close and market maker front running that order book, IMHO). So one could make a case for the “smart money” and market makers loading up inventory at 10% to 5% down, and the mutual fund folks still selling into it.

The close will be interesting…

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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11 Responses to Interesting Fast SPY Chart

  1. Larry Ledwick says:

    Isn’t there a circuit breaker stop on trading at 10% down on a stock? That would tend to create that hard floor, net result if things are really going to hell in a hand basket is that the slide down would just take a little longer but might not stop it.

  2. E.M.Smith says:

    @Larry: In any one day . So not a floor but a very steep slope…

  3. E.M.Smith says:

    Well, the live chart shows buy signals from PSAR, MACD, DMI and price rising nicely….

  4. Jay Reed says:

    Nice call. What are your thoughts on tomorrow?

  5. Larry Ledwick says:

    Interesting postmortem on Monday’s opening drop.

    http://davidstockmanscontracorner.com/was-mondays-etf-collapse-just-a-warm-up/

  6. u.k.(us) says:

    I’ve gotta sell about 15K of my mutual funds in the next 2-3 months.
    So, 2, 3 or even 5 percent ain’t that big a deal.
    I just hate to sell at the low.
    In your unprofessional opinion I should wait for the rebound, correct ?
    I know you can’t say anything.

  7. E.M.Smith says:

    @Jay,

    I’d expect it to continue rising from here. But the charts tell the story… I’ve made a set this morning, but if you are day trading you need to be doing this real time, not waiting for my postings hours out of sync.

    Generally, once the bottom is in, prices return to the SMA stack on the next larger (longer) chart, so on the daily tick chart. (That now shows a bear market, so bear market rules… i.e. get out on the rise, don’t wait 3 days and THEN buy at the moving average lines…)

    @Larry:

    See the posting I just did on some of the ETF price mismatches.

    @U.K.(us):

    I can’t offer individual advice. I can say what I do.

    What I do in these situations is wait for the price to rise back to the SMA stack, then sell. When price is away from the moving averages, it is not accurate. Eventually, it MUST return (by definition – though that can happen by the average coming down…) and then you know you are at a more fair price point.

    When price rises from below, I sell at the SMA stack. When price drops from above, I buy at the SMA stack. Examples in a posting a bit later today… So I would use a 6 month daily chart, and the outer (longer) SMA line as a limit. Given a months time scale, and that we’re talking mutual funds (so priced at the close) the longer time scales are more appropriate (i.e. can’t day trade them).

  8. Jay Reed says:

    Oh I’m not day trading. I’m very interested in your thoughts in regard to events in this sort of time frame. Some of the patterns you talk about in the day to day/15 minute context appear to be seen in the multi year/end of day charts. I find this interesting. And I see you have posted about today. Thank you

  9. E.M.Smith says:

    @Jay:

    Prices are fractal. You will see EXACTLY the same patterns at all time scales. I find it fascinating too.

    BTW, that explains why the same Talking Head shows can have two “experts” saying opposite things. One saying “UP for sure!” the other saying “Time to get out”. They are looking at different time scales… Up for a month, down for the year, or up for the year, down for the month, or…

    At any rate, for the non-trader, it is best to look at two charts. That very slow 10 year weekly (or the easier to read 5 year weekly if you remember the context of the last crash and what it looked like) and the 1 year daily (or 6 month daily if…)

    The slower one sets your context, the faster one your tactics…

  10. Jay Reed says:

    Thanks for your quick thoughtful reply. Yeah, I knew the short hand word for what I was saying was fractal. I tend to avoid it because most people, not you, don’t understand what Mandelbrot was talking about. Not in his early work on rivers and cotton futures nor his later work on the misbehavior of markets. This is true for people who think fractals are great and those who think they’re bogus.

    Earlier today you had a post on the mispricing of ETFs. The visual similarity between your lead chart there and your 6 month/end of day chart in “markets today” post are striking. So much for markets always being properly priced. Both before, during, and after the sudden drop. Or for that matter rise.

  11. Larry Ledwick says:

    More good news on potential pressures on the market from price insensitive programmed traders.

    http://davidstockmanscontracorner.com/top-jpmorgan-quant-warns-second-market-crash-may-be-imminent/

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