November 2010
As you can see in the chart above we were in a very strong up trend, and then all of a sudden we had a sharp pullback that started to channel for about 10 days. The break above the channel signaled the resuming of the trend. The news then was not dissimilar to the news today.
Here is a new clip from CNN on November 21.
"Wall Street also has one eye on the Federal Reserve's stimulus plan and another on instability in Europe -- especially as Ireland is in talks with the International Monetary Fund regarding a bailout for its struggling banking sector."
Sound a little familiar. I believe we are in better economic conditions back then but the Europe troubles are pretty similar.
March 2011
The Chart above shows a similiar pull back in March of last year, strong up trend then pullback. The difference between the chart above and the November pullback is that it broke down below the channel only to bottom and head to newer highs in the short term.
In each case the pull back resulted in a run in November of the SPY gaining 14% and in March gaining another 9% both within in a 2 month period of pulling back.
April 2012
We are in a very similar pattern right now. The question is does it break above or below the channel. If the price breaks above the channel we should see continued moves higher. If it breaks below the channel there might be some short term downside, but eventually I think buyers will come in and we have a 1 to 2 month rally. Look at $133 -$134 as the downside if support is broken.
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Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives
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