Synopsis of past analysis of SPY ...Technically I see a break down of the trend and felt SPY ~$204-213 (or looking at SPX $2040-2013+) to be strong selling opportunities. With the off of strong support, SPY's momentum has a good opportunity to move the price to the 'strong sell zone' providing opportunity to open short positions. A strong price rejection off resistance (as long as ~$2133-2135 holds) would most likely send the price back to the strong . A break of the strong would indicate further breakdown and SPY could potentially continue to fall to $160 or more.
Lastly, fundamentally I believe the chances of a US 'recession' to be very slim. I view what is going on now is market emotions combined with needed correction. I see the current market conditions as an opportunity for savy investors and an ideal playground for disciplined traders.
Updated Analysis (alternative possible scenario).
- The 1W & 1M charts of SPY/SPX show long wicks off of the ~1800-1830 strong . That has been tested and has held up.
- The recent could be the completion of the "C" corrective wave. (see chart) If that is the case, then we could see a new high in the coming weeks.
- See chart two 38.2% Fib Extensions. The first is using the 10-2011 low as the starting point. Probably a better starting point is the 2009 bottom at 666.79. The two extensions are reasonable targets if this was the completion of a corrective wave and SPX closes above ~$2131-2135.
- On the Bear side, notice the HL & LL downtrend since July 2015 (red dash line). Price needs to stay below ~$2116 (and ideally below $2110).
Bottom Line: My thesis hasn't really changed, however when it comes to the market the thesis needs to continually evolve. My plan continues to look for short opportunities within my "strong sell zone", but due to the points above as well as being open to a possible Bull scenario, I will be selective and have a plan in place for either outcome.