We have now formed red candles on seven out of the last eight days on SPY and finding a dip buyer has been about as likely as spotting Bigfoot. While things look bleak, we are in an oversold state and are just above some key support in not only our 200 day moving average, but also the critical lows we formed in mid-march during the tsunami/near nuclear apocalypse we had in Japan. Both of these are likely to act as magnets for price action as we are likely to retest both of them at some point in the near future.
As I have stated for several weeks now, this is not an ideal trading environment for swing traders as we continue to come to terms with the price levels we set in the beginning of the year and they would be better served by keeping positions to a minimum and taking only the highest quality setups. Traders looking for a bounce should continue to wait until they can see some healthy buying patterns emerge on the intraday time frames as they have provided a pretty clear picture of the lack of buying in the markets over the last two weeks.
Looking at a 30 minute chart of SPY, we can see that we’ve had two half-hearted attempts to hold at the $130 price level, but were unable to do so and rolled over after both attempts.
This is likely to become a key area of near term resistance, and intraday traders should keep an eye on it as it will be one of the key battlegrounds the bulls will have to recapture from the bears in order to stave off the recent pullback we have experienced. If we are unable to gain traction at these levels, we will visit the critical “Japan lows” between $126 and $125 in short order. While buyers are nowhere to be found at the moment, we are still in a longer term uptrend and are in the midst of a broad range correction. Keep trading to a minimum and keep an eye on range based trades for the near term future as they are likely to be the setups that provide the best success rate for those unable to day trade the markets. If you have any questions or comments, feel free to contact me on twitter @stockdarts or in our great chat room if you are a stockguy22 member. If you aren’t a member, what are you waiting for?