Courtesy of Jean-Luc Saillard.
Here are some quick charts for SPY on this Sunday before what could be a very interesting Monday!
The first chart show the Fibonacci lines anchored on the lows of 2010 and highs of this year. We can see that on Friday we bounced off the 50% retracement line after a very shaky day. A correction to the 61.8% line (around 115) would actually make sense historically.
On the technical side, we have some positive signs and some scary negative ones. Below are charts for Stochastics (15,3), MACD (12,26), RSI (15) and OBV.
Stochastics are showing a bounce after Friday’s action which reflects the fact that we finished way off the lows of the day. But the other indicators are not so optimistic. Clearly, MACD is usually lagging. But look how OBV cratered on Friday! We are at lows going back to July 2009 except that OBV was on the way up then, not down!
At the same time, we are clearly way oversold and indicators such as RSI are at level not seen since last July and we did bounce from there. But I could not predict a bottom here. This is looking very much like last May and June when we had a couple of big down days (4 days with over 3% losses including 2 over 4%) and then some rallies, but it took 4 attempts to make a bottom and we lost more than 15%… A similar loss would put us around 117.
[Update] – One more chart to illustrate where we are now:
The dotted parallel lines are a standard regression channel with a width of 1 Standard Error on each side. This covers 200 days. The red, blue and green lines are associated with a n-th order Polynomial fit (in this case 3rd order) with channels at 1 and 2 Standard Errors on each side. In both cases, we are way outside the channels which does not happen that often.
