S&P ETF Pulling Back At 61.8% Retracement, Has Crazy Monthly Candle - Chart

The S&P 500 Index ETF (SPY) is up 16% from the October 4 low and pulling back after hitting the 61.8% retracement level (May 2 high and October 4 low) and ceiling resistance. The 200 day moving average is at 127.61 and sloping downward (SPY hit a high of 125.78 yesterday and is now at 123.20, -1.82%, testing the uptrend). See charts below.

The market is pricing in all of these bailouts/stimulus plans in Europe and the U.S., as well as the potential for QE3 and a soft landing in China. Or, the market is pricing in the rally in credit spreads (Tom Lee of JPM), its own move creating economic growth via reflexivity, or perhaps the move is related to the huge spike in sunspots in October. But, many technical analysts (Katie Stockton, Tom DeMark) and portfolio managers (Jeffrey Gundlach) believe this is just a short squeeze in a bear market. Also, ECRI (Economic Research Institute) provided this reminder: "Flashback to an April 2008 interview discussing how ECRI's recession call remained intact despite a rise in stock prices and other data." See ECRI's recession call here. If the S&P manages to break through the steep uptrend line, it could pullback and retest some support levels (simple as that), then we'll see what happens.

There is a big EU meeting tomorrow and a German vote on the new EFSF (European Financial Stability Facility), which will be used to backstop losses from the Eurozone sovereign debt and banking crisis ("The EU paper, obtained by Reuters, shows two options for increasing the fund's firepower -- an insurance model and a special purpose investment vehicle (SPIV)"). See the linkfest below. This Seeking Alpha article said October could post the largest monthly gain in 54 years. That explains the massive green candle on chart 2. MACD on the monthly saw a downward crossover, just like it did in 2007. Also, if the 50 month moving average crosses the 200 month, that would not be good, imo. The market was able to stay above the 200MMA in August and barely in October.

SPY Daily: 61.8% retracement (freestockcharts.com)

SPY Monthly action (freestockcharts.com) -  *supposed to say 50mma/200mma


Greece may need 60 pct bond writedown (Reuters)
Bigger Bailout Fund for Europe Needs Work as Germany Faces Parliament Vote (Bloomberg)
EU Crisis Roadmap: Key Milestones (WSJ)
Ferguson Says ECB to `Print Its Way Out of the Crisis' (Bloomberg Video)
EU Summit Unlikely to Reach Deal: Official (Reuters)
Euro Zone Fund May Draw on China, Brazil: Officials (Reuters)
Canada Dollar Weakens as Central Bank Trims Economic Outlook, Holds Rate (Bloomberg)
U.S. rating likely to be downgraded again: Merrill (Reuters)
RBI lowers GDP forecast to 7.6%; sees inflation at 7% by March (EconomicTimes)

Other technical views:

Katie Stockton (MKM Partners): Market Could Retest Lows! (CNBC Video)
Art Cashin (UBS): If Europe gets messy, Dow could lose 50% of gains in October (CNBC Video)
McClellan Oscillator Confirms New Uptrend (McClellan)

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