SPY Outlook

One of the most asked questions asked of me recently is, "Do I think the market is going to rally from here..."  Here is what Advanced GET and the chart patterns show.

The SPY (SPY) is currently in an Elliott Wave 4 down which should support new lows in the market, however based on our trading criteria there are a few warning signs that do not suggest new lows coming anytime soon.  The first thing I see is that our PTI (Profit Taking Index) is lower than 35, when the PTI is that low it suggests that the market has seen too much profit taking and will not be making new lows, or if the market does make new lows it will be a slow and tedious move.  The second problem is the Wave 3 Time Channels (The Red, Green, and Blue Levels) in a normal Wave 4 we should not exceed the Red Channel.  We have violated this level and this indicates more than normal profit taking.  The ultimate sign on the SPY is the approaching retracement of .618, once Wave 4 exceeds this retracement the chance for a new low is historically less than 30%, this level is 140.81.  If the SPY rally's past this price we may see a retest of the October highs.

Ron Wheeler

Comments

[Rich Miller]

$spx already made a wave 5, could you please give the outlook on that as opposed to the spy. Would it also be correct to look at the retracement of the entire move(from the high in Oct)?

[jr]

Question: for a wave four trade dont you need the oscillator to be zero?

The oscillator is NOT zero under 4 in this cas.

[jr]

For $spx you have a pontential XTL buy trade at 1411 with a stop at 1357.

Also a a GET type 2 counter trend buy trade.

[Ron Wheeler]

Correct, in a Wave 4 the Oscillator needs to retrace 90% to 140% of the Wave 3 Osc. If you measure the Osc from zero to the lowest point on January 24, the Osc is between 90% and 140%.

[Ron Wheeler]

Since the $SPX made a new low on 3/17 the Wave count is a little different. We've made the case on SPY that the market should not make new lows and the same applies to $SPX. We have some resistance around 1410.00 and if we break through that 1540.00 would be our ultimate target.

Since the Wave count is different (complete 5 wave pattern) we cannot use a retracement like we did on the SPY.

[Anthony]

I am a Adv GET user. I am interested in using Adv GET's back testing feature. Is there a doc out there that explains how to backtest TJ's type 1 buy/sell strategy (using the osc,PTI & time channel rules).

[Scott]

At present, our backtesting tools look at historical price action only. We plan to add money management techniques and the ability to cross-reference other studies into our backtester so it could then be used for many of our GET indicators.