SPX S&P500 SPY Weekly Prediction/Historical Correction Analysis
In this weekly analysis, I noticed a similarity in the market correction of the 2nd and 3rd week of May 2021 to the current environment.
As we can see from the chart, in May, the market first dropped below the support level of an ascending channel which then transformed itself into a resistance level. In the following weeks the index traded in the ascending parallel channel just below the previous support line.
I expect a similar behavior this week. In this regard, the market should first pull back to the 4365-4375 area and then recover up to the dashed resistance level. After that, I expect the index to trade in the dashed ascending channel in the upcoming weeks.
Trading idea: Bearish vertical call spread.
Short strike 4510 / Long strike 4515, Expiration Oct 1st 2021 for a credit of about $0.55 vs a collateral of $4.45 which corresponds to a 0.10 delta trade (about 90% probability of success) and an expected ROI of 12.36%.
As we can see from the chart, in May, the market first dropped below the support level of an ascending channel which then transformed itself into a resistance level. In the following weeks the index traded in the ascending parallel channel just below the previous support line.
I expect a similar behavior this week. In this regard, the market should first pull back to the 4365-4375 area and then recover up to the dashed resistance level. After that, I expect the index to trade in the dashed ascending channel in the upcoming weeks.
Trading idea: Bearish vertical call spread.
Short strike 4510 / Long strike 4515, Expiration Oct 1st 2021 for a credit of about $0.55 vs a collateral of $4.45 which corresponds to a 0.10 delta trade (about 90% probability of success) and an expected ROI of 12.36%.