SPY's Wedge and DivergencesThe S&P 500 ( SP:SPX ) as tracked by the most liquid ETF AMEX:SPY , has continued in a wedge pattern since the lows from late October 2023. This wedge has been steep and risen quite dramatically. Bulls will not want to see this break, but given that it's an election year, would the break just be a consolidation with one more high? These are issues everyone is likely considering.
The series of negative (or bearish) divergences could continue, as anything is possible in markets. But it shouldn't be ignored either. The Supplemental Chart below shows the series of lower highs on RSI, using SPY's daily time frame.
One final note of caution. This wedge pattern technically (no pun intended) hasn't broken yet. Nor has its 21-day EMA. A break would help bears, at least short-term ones, see more downside or consolidation.
GammaLabs, who this channel follows, mentioned in its briefing today that CTAs remain max long still and may become "systematic sellers" below 4900 SPX. So more downside is needed for bears to gain traction. The technical conditions for consolidation are ripe, though, with the wedge and divergences shown. But confirmation remains needed.
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Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
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