SPY Analysis

To summarize in a nutshell, the market was entering an up cycle (short term)

Here you can see the accumulation period on 4/12-4/14. On 4/15 which was the Friday the S&P ratings outlook news hit Wall Street (we didn't find out until Monday) I posted that 3C and breadth were falling apart quickly and it looked like short selling on that Friday. Sure enough, Monday we dropped hard and interrupted an up cycle that was only in its second day. On Monday, 4/18 I posted the following:

"I would think if there was a fairly certain fear on Wall Street that they've lost control, we'd be seeing a lot more negative looking charts. Unless we see something really nasty toward the close, my guess is they try to salvage what they can of the last cycle that was in effect; that may cause it to be shorter then originally planned, but it also gives you the chance to let the trade come to you.

If tomorrow (and I don't see a high probability of this right now) the market falls apart, then the entire game changes and Wall Street would be in a position it's rarely in. So for now, my vote is that they'll try to regain today's lost ground. If that happens, then we'll have to see if they intend to continue with the original plan or if they will modify it by shortening the cycle (we'd see pretty heavy distribution) and try to make up the rest on the downside."

 If we take away the S&P effect to the market (the days in the white box) and follow the green arrow, they did exactly what I suspected they'd do from my post above on Monday the 18th, the continued the cycle. Right now it's close to an area i which I'd expect to see distribution in play.

 Looking at the 5 min chart, we can see there are negative divergences starting Thursday of last week and today.

The 10-min is also in a negative divergence, so it appears that this cycle is coming close to having run it's course. Because we are so close to the April highs, I wouldn't be surprised to see an attempted move intraday or otherwise to breach those highs before a reversal takes effect. It's not a mandatory event, but it happens more often then not. The main point is the cycle seems to be near the end and we can start to look for the next cycle which would most likely be down, although there' also a 3rd trend which is lateral, however I feel that is less likely.

There are several trades members have emailed me about this a.m. that look to be in good position to start phasing into, mostly short trades or inverse ETFs. You may want to consider using any strength we see to phase into trades for the next cycle as your risk is now substantially lower then it was a week ago as you can place stops a few percent above recent intraday highs. If there are any specific trades you'd like to talk about, as always feel free to email me.