Stock Pick Update: Short The SPY 2-23-2009

Stock Pick Update: Short The SPY 2-23-2009

On February 23, 2009, In Featured, Market Updates, Stock Picks & Tips, by Steve Warshaw

Recap

Last Thursday on Twitter, I recommended getting short the SPY. The SPY opened at 79.77, and today, closed at 74.65. That’s a 6.3% gain in 3 days, not too shabby.

Although the negativity in the markets is deafening, we are due for a bit of a relief rally somewhere. I wouldn’t be surprised to see the SPY try to pull back to the $78 level, but I’m fairly certain that level will hold with all things considered.

Technical Outlook on the SPY

As of the close today, we’ve closed lower than the November 20th, closing low of 74.84, and are a mere $0.91 from the November 21st, intra-day low of $73.74.

The scary fact is this: there is some VERY weak support at $73.84, then after that, the next area of any support (and it isn’t much) is at $64, then below that a strong area of support around $47. Can you say OUCH?

The indicators are supportive of continued downward pressure.

The Money Flow Index (a leading, volume based indicator) is showing money flowing out of the SPY, but it has a long way to go before reaching an oversold level (current reading is 37.7, oversold = 20). There is no divergence in the MFI

The PPO shows a sell signal on the 13th of February, and has rolled over following the brief sideways actions from mid January to early February

The Arron indicator, which is a trend strength indicator, is showing the current downtrend gaining strength.

Buy Into Rallies

The SPY is going down, there can be little doubt about that. Any Rally that falls short of the $83.82 level should be considered a relief rally, and an excellent opportunity to add to a short position