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Stock trading masters, here is your weekend technical analysis on SPY for trading on Monday, June 28 2010.

The logic for why we examine the weekly chart to start with, despite the fact that we trade with a much shorter time frame is that initially we have got to determine the trend.

How many times have you been studying a time frame and taking an entry off a support or resistance line only to end up being surprised by a move you didn’t think was coming? This takes place because the price moves outside the time frame you were studying.

To get around becoming fooled like this, you ought to look at a higher time frame in an effort to determine the trend. That is the reason why we do technical analysis on the weekly chart in the beginning.

The weekly chart of the SPDR S&P 500 ETF (SPY) finished the week with a Bearish Engulfing candlestick. The MACD continues negative on the weekly stock chart. We also see a Bearish Head and Shoulders top being formed and we are just above closing the neckline representing the right shoulder.

Zooming in on the daily chart, we realize that the neckline closes at roughly $104.70 . We also have the MACD crossing beneath the 0 line.

Right now the stock trader thobbit60 writes, “I be in agreement with your bearish analysis. Hence why not short the SPDR S&P 500 ETF (SPY)?” No shorting the SPDR S&P 500 ETF (SPY) until the neckline is closed on the Bearish Head and Shoulders top. It also is practical to get at least one day of confirmation under the break on good volume. We recognize how tempting it is to shoot early but you have got to try and be patient.

The hourly stock chart shows the rapid transformation in institutional investor attitude beginning last Monday, June 21 2010. Why? What happened?

To respond to that inquiry you should move back to the gap on 06-10-2010. This bullish gap up occurred as the consequence of weekly jobless claims plummeting by the largest amount in over a year. Thus the mass of stock market participants held that the economy was still slowly recovering. But on 06-21-2010 this all changed with the news flash that housing construction was officially in a double dip.

As the week went on, additional bad housing news came with the fall in home sales. Next GDP was revised downward. Being that housing is such a crucial component of our economy making up 70% of GDP, institutional investors realized that a double dip in the housing market could very well mean a double dip recession.

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