Over the past few days many traders have asked me: “Could the recent decline have been predicted?”
Well, I don’t know about predicting, but certainly it could have been anticipated. Let’s see how.
Using SPY
The accompanying chart has the S&P Spydr, SPY on a daily basis. This is the ETF for the S&P 500 and is a good symbol to watch when tracking the overall US market. On each chart is the Weis Wave in a 3-point reversal – a very useful chart.
Weis Wave Tells the Story
The Weis Wave was developed by David Weis, world renowned expert in the Wyckoff Method. The Weis Wave is a modified version of Wyckoff’s tape reading wave chart for modern markets. It tracks price and volume via the individual waves, or swings, of the market. As Richard Wyckoff emphasized, the market moves in waves and the trader who understands the wave structure of the market has a definate leg up in trading.
Market Well-Behaved in UpTrend
The left hand chart highlighting larger wave reversals shows a well-behaved uptrend with strong demand or buying on waves A and C. You can see the buying reflected in the lower panel’s green pyramid shapes representing volume. Buying was strong on A and C, and on the reaction to B, the selling was modest. These are typical signes of a strong uptrend.
The reaction into mid-March at D shows a pick-up in volume. Nothing to be alarmed about, but something to notice.
Tell-Tale Sign at the Top
It is the wave up to E that makes us sit up, however. Here we see a higher high in price, but look at the volume! It is not even close to the buying volume seen on waves A & C. Astute traders would initiate shorts as E starts down.
When Selling Overcame Buying
The wave down at F shows that heavy supply hit the market. You can clearly see the increased selling on this down wave.
When to Short
Two short opportunities present themselves: The low volume rally on wave G and the even lower volume rally on H. Both of these waves are saying that buyers have gone away; there is no more substantial buying left in this market. Given the supply seen at F and the absence of buyers at E, G & H, we can expect another drive down. Of course, we know what happened.
How to Acquire this Unique Information
You can view the markets exactly like this – any market, in any time frame, including seeing intraday setups just like this. David Weis – a 40+ year student of the Wyckoff Method – will be revealing his Weis Wave next week in a webinar you can attend. Volume is the professional’s main indicator. David has made volume a clear and precise instrument for high quality trades. You can get his Weis Wave indicator and the education needed to use it next week. Learn more here:
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