Thursday, June 14, 2012

Dialy vs Weekly RSI on SPY

SPY on the daily chart is/was calling for at minimum a brief overshoot of it's previous near term high of 134 based on the daily RSI bullish divergence.  That objective has been reached and although we can leak higher over the coming days eventually the weekly bearish RSI signal will take over and it is calling for a major primary trend top with a minimum price move down to 110ish area on the SPY or possibly all the way back down to the 90ies. I consider the weekly signal to be a high probability bearish set up even though the 2 peaks that make up the pattern are spread over a much wider time frame than for example the 07 top was.  I consider this to be because of the HFT flash crash that distorted the RSI time/price relationship (as it relates to divergence signals)

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