First post - SPY analysis July 17, 2009

Hello

I've decided to start a blog for fun. This blog will mainly discuss financial matters, as I have developed quite an interest for trading various financial securities, and also in maximizing one's value for the money. What goes on at Wall Street is absolutely astonishing, and I have learned the hard way that what Wall Street tells the public, and what you financial advisor at the local bank tells you may not necessarily be in your best interest. So this blog will provide a counter balance to all the hype that is coming from Wall Street, governments and maybe your personal financial advisor. This blog will also refer to my personal scorecard of how well I can predict the markets. Anyways I am new to blogging so excuse me if my posts don't look to fancy.

Anyways on to my analysis for the day. Needless to say that I'm quite bearish overall especially with the nonsense that's been going on in Wall Street lately. But rather than impose my views, I'll let the charts do the talking and the reader can decide for themselves. Above is the daily chart for the S&P 500 (SPY), which you can enlarge if you click on it. As you can see we've been in a very strong uptrend since early March. Lately, this upside momentum appears to be stalling, where the market has more violent corrections downwards, and the rate of ascent of the chart appears to be stalling. Over the last couple of weeks a bearish head and shoulders formation was forming, however since Monday July 13 2009, a violent upswing took place invalidating the bearish head and shoulders pattern, and a failed pattern usually results in a violent reaction in the opposite direction, hence the strong rally that transpired this past week. If we look at the chart of the recent month or two, we might be experiencing a megaphone top pattern (the megaphone has been drawn in white lines on the chart). This is when the bulls and the bears are really fighting for control and emotions become stronger. However with the trading volume extremely light and the financial mess that the economy is in, I would place my bets we will see a top in the markets within the next couple of weeks before a violent crash. But before that top happens, we could possibly top out at the top range of the megaphone which is about 100 on the SPY. If we manage pass that, then 102 on the SPY will be heavy resistance (indicated by the horizontal yellow line), as that was the high in November 2008 as the market rallied euphorically on Barak Obama's presidential victory before crashing down into multi decade lows this March.

So in a nutshell, I think the markets are going to crash, but before that happens, we might have some good upside left in the market about 5% - 10%.