20 Year SPY Double Top Chart At Key Support Level
30. Apr, 2009 
3 Comments
Looking at the 20 yr chart for ETF following the S&P 500 – SPDR S&P 500 ETF (PCX: SPY), I noticed an interesting development going into May. As many of you have most likely seen this double top S&P chart elsewhere, the long-term trend on SPY is looking very bearish with the double top pattern. If you’ve read about the technical patterns, double top indicates a bearish sign and it’s one of the most reliable patterns out there.
What’s more interesting is that today market was up over 2% intra-day and bounced down heavily thereafter. The aftermath of today’s market actually develops to the chart above where it is floating right at the multi-year support levels from the past 20 years (in blue arrows). Right now, we all know it – the market is overbought. While it could easily continue its rally, and the market has done that in the opposite direction before (we’ve all seen that already right?), many believe that a pullback from here is likely. If this is truly the case, it would be extremely interesting, even if its coincidental, to see a pullback start in the next few weeks back down from this multi-year support level. Looking at the slow stochastic (circled in red), it’s certainly getting ready for a reversal, at least temporarily.
The 20 year chart is not really relevant, as S&P 500 holdings have changed over the years.
Is it truly not relevant? I bet ya there are plenty of investors looking at S&P charts both short-term and long-term. I’ve seen the SPY double top charts being shared everywhere. I gotta believe I’m not the only one inferring something out of it.
10 or 20 year ago levels are just for relative comparison, but have little to do with today, as does the market action from the depression. Similarities, yes, for a while, but the government response is so different, and the system is so different fro m10 and 20 years ago, that the comparative data point of 1 or 2 or even 3 is statistically meaningless.
Technical analysts use these historical levels to estimate value, but that’s a rule of thumb because value has all to do with today and the future. Technicians have no other way of calculating valuation because the future does not exist in the charts.
What behavior and valuation is much more meaningful, are greedy behaviors and leverage statistics, because those are high risk measures, and high risk measurements have more similar outcomes than times of low risk measurements. that’s the asymmetrical modeling difficulties with market algorithms. Very few humans can deal successfully with multi-dimensional non linear, transitory relationships. . .
sportsguy