SPY
Price: 141.56

Bollinger Bands
Hi: 148.36
Mid: 140.40
Lo: 132.45
Action: Price touched BB high the week of Sept 10th, hit the mid BB this week, and now rests slightly above mid BB. Candlestick shows mostly wick with small body. The wick is roughly twice as long above as below the body. This candlestick is common before mid BB pass-throughs. Last seen May 7th. 

SMA
50: 134.79 (last touched in May 2011 during minor ~10% correction)
200: 113.64 (last touched in August 2011 and again in September 2011 during ~24% correction)

RSI: 55.06 coming from high of 70
STO: 70.03 descending from 2 months above 80
MACD: 2.632 (recent bearish cross-over), last 3 MACD highs descending. 

Support: 140.4, 139.4, 138.4 Fib Lines, 138.6 Lower channel extending from 2008 low.

Description of Action: The past 6 weeks have alternated between a fat red candlestick followed by a thin green candlestick with long wicks (with 5 out of the 6 descending). If the pattern holds, this will be a strong down week. Thursday offered a strong up day on light volume, and Friday followed by eliminating Thursday's gain on higher volume. This is a critical week, as pricing can bounce or pass through the mid BB. Time-wise the lows in 2011 were about 5 quarters away from the lows in 2010, and we are 4.5 quarters away from the lows in 2011 right now.

Suggestions: If price passes through the mid BB, we are set-up for a 10% minor correction (we have already experienced about 5%). This will take us to roughly 133 territory within a about a month. There should be some small bounces along the way, so do not expect a one week fallout to that range, but red days will be strong and green days hard to predict with small and fleeting gains.

If pricing bounces upwards from the mid BB, (which may happen around 139.4), we can approach recent highs again, but will set up another ~24% correction likely from upper 140's to the 200 SMA weekly line in the mid 110's. (~115ish). That potential second bounce to the upper 140's may likely bring RSI above 70 and contract the BB band, coiling the spring further.

Weekly Charts suggest a good chance to fall through the BB this week at least to potentially around 138.6 to 139.4. Tomorrow I will post a daily report to look further into the likehood. Until we reach the bottom of the Bollinger Band, caution should be exercised with any thoughts of a Bull play. Using rips as set-ups for shorts will be the theme.

Chart 1: SPY Weekly with BB




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