SPY: Making Money In A Bear Market (Technical Analysis)

Seeking Alpha2022-09-05

SummaryThis is a technical analysis article on the SPY ETF. Professional traders hate risk and love "sure things." Why? Because trading is risky enough. They prefer to make money the easy way.They are...

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Huat Huat Al
2022-09-05
Huat Huat Al
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Professional traders hate risk and love \"sure things.\" Why? Because trading is risky enough. They prefer to make money the easy way.They are...</p>\n\n<a href=\"https://seekingalpha.com/article/4538914-spy-making-money-bear-market-technical-analysis\">网页链接</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SPY","symbol_name":"标普500ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4538914-spy-making-money-bear-market-technical-analysis","article_id":"1140356635","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1140356635","pubTimestamp":1662364813,"columns":[],"sourceInfo":null,"weMediaInfo":null,"summary":"SummaryThis is a technical analysis article on the SPY ETF. Professional traders hate risk and love ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SPY":"标普500ETF"},"translate_title":"间谍：熊市中赚钱（技术分析）","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SPY":0.9},"content_text":"SummaryThis is a technical analysis article on the SPY ETF. Professional traders hate risk and love \"sure things.\" Why? Because trading is risky enough. They prefer to make money the easy way.They are always on the search for contrarian trades that are a \"slam dunk.\" Why? Because they don't want to be fired for being wrong.They love being right all the time and getting big, fat bonuses at year end.So what is a slam dunk in this bear market? Knowing that the Fed is in a bind and has to take the economy down which creates the bear market we trade.What is the slam dunk rule? Buy puts or some other short strategy after every bounce, until the bottom bounce, which is still a very long way off.The easiest way to make money in a bear market (NYSEARCA:SPY) is to short every bounce as long as there is no bottom in place. There is no bottom in place yet for this market. TheSPY is targeting a retest of $364 and there is no indication that $364 is the bottom. The SPY could still go lower, based on the bind the Fed is in, because the Fed is targeting a 2.2% inflation rate. That is a long way off, and so is the bottoming process in the SPY determined by that Fed target.Isn't Trading Very Risky?Trading is risky enough, so the only way to reduce risk is to find slam dunk trades. To do that with any stock or the market, traders look for \"research\" that gives them the lowest risk, successful trade. That \"insightful information\" is hard to come by usually. However, in the case of this bear market, everyone has that insight, because the Fed is giving it free to everyone. Fed Chairman Powell just warned of the \"pain\" that is coming to bring inflation down.Because the economy was running hot, with very high employment and very high inflation, the Fed has told us what they are going to do. Even if the Fed did not tell us, it was easy to see what they would have to do. With that knowledge we know this bear market will continue until it bottoms. With that obvious conclusion, we can find a way to make money in this bear market.What's An Example Of A Successful Trade?Friday was a good example of a bear market bounce where you could make money shorting. We actually provided a minute by minute description of the bounce on Friday morning, using our live charting system with comments. We watched the day traders short it on the opening gap. Then we watched it going up to be stopped by resistance.For those subscribers that missed the live comments, we published an article as the bounce reached its top. We bought puts and we are still holding them. We are sitting on a nice profit because the bounce failed and then dropped back to the $392 support level. We have discussed this level frequently.Where Is The Bottom Of This Bear Market?We don't expect the support at $392 to hold and we don't expect another bounce from this level. Our short term target for the SPY is $388. As discussed here in previous articles, our longer term target is a retest of $364 and it could go lower to find a new bottom. Thus you can see why we are buying November, out of the money, puts to make easy money, as this bear market continues for the foreseeable future. The end of the recent big bounce up failed at $428 resistance, and we don't expect another big bounce until we retest $364 or from a lower bottom.How Do The Pros Make Money In A Bear Market?The professionals know all of this and are coining money on these slam dunk bounces. They are buying the S&P VIX Index (VIX) or the ProShares UltraShort S&P 500 (SDS) which go up when the market goes down. They are selling calls on their stock portfolios or buying puts like us. (Our Model Portfolio is in cash so we cannot sell calls) The professionals know how to make money in a bear market and so do we.Everyone knows the rule: buy the dips and sell the tops. It works both in a bull market and in a bear market, as happened on Friday. Only the day-traders caught a little bit of the bounce, because they don't last long in a bear market. However, the dives, from the top of the bounce last much longer in a bear market and this is where the easy money is made by shorting or buying puts or buying the SDS.When Was The Sell Signal On Friday's Bounce?Here is the 5-minute chart showing the rise and fall of this bounce on Friday and how we called it minute by minute on our live charts for our subscribers.Buying Puts At The Top Of The Bounce (StockCharts.com)Here are the minute by minute comments we gave our subscribers as we commented on the live charts. We signed off to publish the sell signal in an article to our subscribers and then to buy our puts.9:55 am the day traders shorted the top but failed to fill the gap by covering early. I am still looking before the gap to be filled10:27 surprising retest of 400 and I think another chance to short at 400 -401 price resistance especially on Friday in a bear market and holiday weekend when everyone goes home early especially daytraders10:34 at 400.72 looking for sell signal, overbought, At price resistance, daytraders usually short10:41 at 401.12 RSI overbought waiting for the breakdown sell signal by day traders.10:46 at 401 toppy candlesticks inviting daytraders to short but they are waiting for RSI to turn down.10:50 red candlestick, waiting for RSI breakdown for red vertical line10:53 here come the sellers at 400, red vertical line now.11:08 signing off, bye bye with this red vertical sell signal in placeAs you can see on the above chart, the first RSI sell signal, at the top of the chart where we put the vertical red line, was a head fake. After filling the gap by taking price down, the day-traders then took it back up to the final wall of resistance at $401. The second vertical, red line, sell signal proved to be correct. That is where we ended our comments and wrote an article to our subscribers. Then we bought our puts as the RSI continued down, unlike the head fake, first red, vertical line. Our put position has a nice gain and is still open.What's Ahead In The Coming Weeks?So much for day-trading. Most of us are interested in what the weekly chart is telling us longer term about this market. It is not a pretty picture. As you can see, all the signals have turned down on the chart. This indicates to us, weeks of selling ahead that will take the SPY down to retest $364.September is usually a terrible month according to theStock Traders Almanac, which provides all the historical data on the market. To help things along, we have the Fed \"pain\" announcement coming on September 18th. We think the market bottoms in October and then we start the best six months for the stock market. In May we may finally see the bottom of this bear market.Here is the weekly chart:SPY Targeting $364 (StockCharts.com)ConclusionThe weekly chart has lagging, but more reliable signals than the daily chart. In other words, these signals do not reverse as quickly as the daily chart. We expect the negative trend of all these sell signals to continue for the coming weeks, still targeting $364. 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