S&P 500 Index SPX The Trump Rollercoaster Ride in 2d -
The post-Trump rally in the S&P has been a text-book affair,
with 4 clear phases and speeds, like a car going through the
gears. First gear is the lower parallel with a direct hit on the
day after the election in November 2016. It rallies and then
drops in gear/speed, the technical equivalent of double-de-
clutching, in a rising continuation pattern, which goes on all
through the following summer. Then in mid-November, a year
after the paradigm shift, it picks up speed and slams into 3rd.
And then right on the turn of the new year 2018 it takes off
vertically, a final straight-line ascent with another perfect
speed/trend/dynamic support line running right under the
lows. It is about as technically perfect as you can find
(outside of Bitcoin, of course).
The great 37% Trump rally then ends with a complete
break/fracture as the SPY gaps down from the support line
(exit all longs!) and then dances in thin air (think:Wile.E
Coyote, green arrow) for a little while and then collapses and
creates another gap - thereby creating an island reversal at
the top - one of the most rare and powerful and reliable
reversal signals of all in a major market index. (Bulkowski
does not differentiate much between indices and individual
stocks in this respect which is a shame as both behave quite
differently. Island reversals are rare at both tops and bottoms
in major market indices, usually). Whatever, the result was
spectacular.
A week of mayhem took the index crashing back to the lowest
2 parallels' intersection /gears 1 and 2 again - before
rebounding. It finished last week right under an important near term resistance line at 2690 and which extends to 2701 on this chart - this index is still in danger of further correction whilst below here. I has to move above 2702 and hold up there through the opening 30 minutes - if it can manage this the bulls are likley to push it on tup to 2714 to begin with and then after a little while consolidating on up to 2748. Two near term potential long trade set-ups.
Returning to the downside, the S&P is still vulnerable to
further correction whilst unable to break and hold above
2701-4 on SPY - even if it can manage to rally and hold above
2704 it's unlikely to get much higher than the 2749-2755 range
before falling away again so will not be pushing it here even if
we see upside trades trigger. It really looks like it needs to
come back and retest the lower parallels again in the
2555-2550 range before it can really hope to stabilise. At all
costs the lows at 2539-2530 must hold up this week on any
retest. And if we do see this retest unfold at any point will be
looking to buy here so long as it starts to hold and fight in this
range for 5 minutes or more but still ready to reverse this
tentative/speculative long shot if triggered by the price
action needed. Because if not and it breaks lower than 2530 it
will open a good shorting opportunity back to 2488 at least
and maybe 2416-2400 range at lowest before the next great
rally commences.
An interesting week lies ahead for the S&P and by extension
the savings/retirement accounts of pretty much everyone in
the world. Really want to be wrong on this one. But it just
doesn't look safe whilst stuck under 2700.
The post-Trump rally in the S&P has been a text-book affair,
with 4 clear phases and speeds, like a car going through the
gears. First gear is the lower parallel with a direct hit on the
day after the election in November 2016. It rallies and then
drops in gear/speed, the technical equivalent of double-de-
clutching, in a rising continuation pattern, which goes on all
through the following summer. Then in mid-November, a year
after the paradigm shift, it picks up speed and slams into 3rd.
And then right on the turn of the new year 2018 it takes off
vertically, a final straight-line ascent with another perfect
speed/trend/dynamic support line running right under the
lows. It is about as technically perfect as you can find
(outside of Bitcoin, of course).
The great 37% Trump rally then ends with a complete
break/fracture as the SPY gaps down from the support line
(exit all longs!) and then dances in thin air (think:Wile.E
Coyote, green arrow) for a little while and then collapses and
creates another gap - thereby creating an island reversal at
the top - one of the most rare and powerful and reliable
reversal signals of all in a major market index. (Bulkowski
does not differentiate much between indices and individual
stocks in this respect which is a shame as both behave quite
differently. Island reversals are rare at both tops and bottoms
in major market indices, usually). Whatever, the result was
spectacular.
A week of mayhem took the index crashing back to the lowest
2 parallels' intersection /gears 1 and 2 again - before
rebounding. It finished last week right under an important near term resistance line at 2690 and which extends to 2701 on this chart - this index is still in danger of further correction whilst below here. I has to move above 2702 and hold up there through the opening 30 minutes - if it can manage this the bulls are likley to push it on tup to 2714 to begin with and then after a little while consolidating on up to 2748. Two near term potential long trade set-ups.
Returning to the downside, the S&P is still vulnerable to
further correction whilst unable to break and hold above
2701-4 on SPY - even if it can manage to rally and hold above
2704 it's unlikely to get much higher than the 2749-2755 range
before falling away again so will not be pushing it here even if
we see upside trades trigger. It really looks like it needs to
come back and retest the lower parallels again in the
2555-2550 range before it can really hope to stabilise. At all
costs the lows at 2539-2530 must hold up this week on any
retest. And if we do see this retest unfold at any point will be
looking to buy here so long as it starts to hold and fight in this
range for 5 minutes or more but still ready to reverse this
tentative/speculative long shot if triggered by the price
action needed. Because if not and it breaks lower than 2530 it
will open a good shorting opportunity back to 2488 at least
and maybe 2416-2400 range at lowest before the next great
rally commences.
An interesting week lies ahead for the S&P and by extension
the savings/retirement accounts of pretty much everyone in
the world. Really want to be wrong on this one. But it just
doesn't look safe whilst stuck under 2700.
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