Using Indicators to Call Time of Death on SPY

Consider the following chart of SPY (ETF for S&P 500) and the indicators at the bottom.

First and foremost I want to draw your attention to the two green circles vs. the purple circles. I would ordinarily be worried about stochastics stopped dead in the middle of the chart but this pattern looks awfully similar to what happened in mid April. Next the RSI has dipped to about the same level. Finally the composite has made a "w" shape at about the same level. All of this points towards an upswing. Now look back at the chart and these patterns look pretty darned similar wouldn't you say?

Next let's take a look at resistance levels on the indicators:

The red bars on each indicator show where SPY has been topping out in the recent past. If it gets back up to here then the end is very close. Note the "w" shape in the composite is generally a sign of reversal. One shouldn't count on a "w" but instead look at the smaller charts to ascertain whether another blip is coming. It is of course possible for a strong rally to send the security up past these levels but I would still consider that level to be high probability for the end.

Next consider how the indicators gave good signals near the prior peaks:

Divergence such is seen on the first two peaks should not be ignored. The absolute top did not give us divergence but both stochastics and the composite spelled things out pretty clearly after a few ticks down. Finally (had I been paying attention) there was a definite buy signal from all three indicators at the bottom of the prior valley.

Finally we must consider the possibility of a fake out:

What looked to be a resumption of the bull market was brought to an abrupt halt on June 1st. This one I was lucky enough to catch. I noticed that the prior day had ended with a hammer, a peculiar candlestick to see at that point in a rally. I shorted the next day and made money. Unfortunately I covered about halfway through that red candle, never expecting it to go as far as it did.

The indicators were not very helpful here. Stochastics gave a false signal (black bar). Granted, if you had bought early enough on that signal you still would have gotten out whole. RSI was giving no information. The composite was the only one giving information. We didn't get a "w" shape but also it had not fully dropped to the support level (green bar).

This is relevant because as you can see, this past nadir also did not drop to that support level. We will have to be on the lookout for another truncated rally. This time would almost certainly spell the beginning of the bear market.