- During SPX peak in February, we can observe RSI bearish divergence on the 30 minute chart right before the crash. This leads to the next point.
- We can observe a second RSI bearish divergence forming in the last two weeks.
- Following the low on March 23, the bear market rally has ranged nicely in a diagonal channel.
- Ignoring April 1-3 in this analysis. These days are outliers outside of the main channels and can be dismissed as noise in hindsight.
- On Tuesday April 21, we finally broke out of the main bear rally channel. Price action on 22-23 April confirmed this, with two consecutive daily closes just under 2800, both days ranging above 2800 and being forced under, within minutes of the closing bell.
I believe we are at the crossroads of two potential downward channels forming:
-The first potential channel slopes aggressively downward and we would observe this channel forming by tomorrow or early week of April 27. This channel could retest the bottom, form a head and shoulders pattern, and would kill off any V recovery theories.
-The second potential channel slopees downward at a slower rate and would take its time to build out. The direction of breakout of this channel is a coin flip. It could go down as a bearish pennant when we realize we have bigger economic problems than just "reopening the economy". It could also go up as a bullish pennant (Trump and Fed are doing anything and everything to pump the markets - which I believe will hurt more than help in the long term). I have a strong bearish bias for the next 2-3 quarters but cannot rule out the effect of the Fed pump. Still leaning towards a short for this idea.
Trading and investing in general carries risk and can and result in considerable loss. None of the strategies discussed here is financial or trading advice or recommendations. The author assumes no liability including for errors and omissions. Everything presented are the author's ideas and opinions only.
- We can observe a second RSI bearish divergence forming in the last two weeks.
- Following the low on March 23, the bear market rally has ranged nicely in a diagonal channel.
- Ignoring April 1-3 in this analysis. These days are outliers outside of the main channels and can be dismissed as noise in hindsight.
- On Tuesday April 21, we finally broke out of the main bear rally channel. Price action on 22-23 April confirmed this, with two consecutive daily closes just under 2800, both days ranging above 2800 and being forced under, within minutes of the closing bell.
I believe we are at the crossroads of two potential downward channels forming:
-The first potential channel slopes aggressively downward and we would observe this channel forming by tomorrow or early week of April 27. This channel could retest the bottom, form a head and shoulders pattern, and would kill off any V recovery theories.
-The second potential channel slopees downward at a slower rate and would take its time to build out. The direction of breakout of this channel is a coin flip. It could go down as a bearish pennant when we realize we have bigger economic problems than just "reopening the economy". It could also go up as a bullish pennant (Trump and Fed are doing anything and everything to pump the markets - which I believe will hurt more than help in the long term). I have a strong bearish bias for the next 2-3 quarters but cannot rule out the effect of the Fed pump. Still leaning towards a short for this idea.
Trading and investing in general carries risk and can and result in considerable loss. None of the strategies discussed here is financial or trading advice or recommendations. The author assumes no liability including for errors and omissions. Everything presented are the author's ideas and opinions only.