SPY and DIA Elliott wave analysis

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April 25, 2013
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SPY and DIA despite the recent violent pull back towards April lows, are now just a few points away from their highs. The overall structure of the rise from last November looks complete according to our Elliott wave analysis. We see in both a very good possibility that the top is in and that the move from past November over. Although prices remain inside the rising trend channel, we believe its time for a correction. Nevertheless for our analysis to come true, support levels must be broken.

SPY although it pushed outside of the rising trend channel, it has only pushed below support level during the intraday movement and there is no close below support. However, this was the first time prices moved below the level (153,77)  that produced a new high (159.71). It is important and vital to the bearish scenario to see if  a new high is made.

SPY

It is also important to note that the decline from highs is most probably in 3 waves. This is not good for the bearish scenario. However this decline could be only the first part of the correction (wave A), with the second part of the correction (wave B) underway. If our analysis comes true, next we should expect a decline as wave C to break the green support level. The first support below that is the 38% retracement.

DIA on the other hand has not broken the upward sloping channel. However the wave count here is very similar to that of SPY.

dia

The same apply for DIA. The bearish scenario will increase its chances of success if prices break downwards outside of the upward sloping channel. With this analysis we do not try to be the only ones to be sure that the top is in. We do not have a preference for the market to continue upwards or downwards. We only want to point out the important levels and the most possible scenarios in order to make profitable trades. We always respect resistance and support levels and we are always ready to change our view if a level is breached. The main point we try to show from this analysis is that markets have traveled for a long time in a rising trend. The rise has a form that makes us believe that will need to be ready to cover their positions in order to protect themselves. The more rise continues, the more possible it is we are nearing an intermediate top and the more we will prices fall to make a correction.

For more help trading don’t hesitate to contact us. As always, thank you for reading my new post.

A term used to describe a trader who is expects that a particular asset – be it a commodity, currency or product – to rise in value. The opposite of a ‘bear’.

The idea is that bulls attack by bending their heads and poking their opponents upwards with their horns, symbolising the fact that they are buyers, driving prices up.

Beliefs held by the aforementioned ‘bulls’ of the trading world, are described as bullish. Characterised by a generally optimistic outlook on the state of a given asset, a bullish outlook would suggest that a rise in value is imminent. Opposite of bearish.

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.