Thursday, September 22, 2011

SPY Watch

The S&P 500 exchange-traded fund, SPY, gapped down sharply this morning, moving below the 20-day Donchian price channel into bear phase, yada yada yada.

Bored now.*

Point being, almost all stocks with serious liquidity and market cap participated in that move. What counts, in my book, is Monday.

sym phase trend adx   200/50 40/10

And SPY, like many issues that I've looked at, broke beyond the price channel but stayed within the sidways trading range that began Aug. 9. SPY is toying with the lower boundary of that range, but it hasn't broken through decisively.

The Aug. 9 open on SPY was $114.07, and the low was $110.27. Either one can serve as a reasonable benchmark for the lower end of the range. Whichever level a trader uses, SPY won't decisively count as a downtrending stock until it breaks below the Aug. 9 low. If a decisive break happens, then hang on to your hat if you're holding bear positions. If not, then be prepared for further ambiguity -- with luck, in the form of a nice retracement.

The way I deal with ambiguity, often, is using iron condors, an options construct that profits within a range, and loses once the stock has broken out of that range. I hold an iron condor position in SPY. My profit points are bounded by 111 and 125, with stop/losses set slightly within those levels.

* With a nod to Alyson Hannigan in the role of Evil Willow in Buffy the Vampire Slayer, season 3 episode 9.


  • phase: 20-day price channel phase, with green for bull trend, red for bear trend and yellow for neutral trend.
  • trend: Price direction, green for higher highs and higher lows, red for lower highs and lower lows, yellow for neither.
  • adx: Average directional index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 25 and up but below 40, magenta (light purple) for 20 and up but below 25, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, magenta for sunset on the horizon and brown for the earth.)
  • 200/50: The moving average cross, green for the 50-day ma above the 200, red for below and yellow for closely aligned.
  • 40/10: The moving average cross, green for the 10-day ma above the 40, red for below and yellow for closely aligned.

About my trading methods

Read a detailed explanation of my analysis method, including trading rules.


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

The trader’s greatest sin is inaction. Sleeper, awake! Seize the Nietzchean moment. Roll out of bed and trade.

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