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SPY - About to Drop the Hammer? - 200 Moving Average in Sight

AMEX:SPY   SPDR S&P 500 ETF TRUST
Would all the people waiting for a pullback please stand up!

As those who follow my analysis would know, i (and a host of other analysts) have been warning of the inevitable 2nd wave down that EVERY market will face at some point.

From the 1929 crash

to the 2000 tech wreck

to the 2008 GFC

and what i believe will be remembered as the 2020 market crash

But...

Let it be know that just as trying to catch a falling knife is ill advised, so it seems is to try to catch a plane mid takeoff.

That being said, the SPY is fast approaching the 200 moving average and has crossed above the 61.8% fib retracement.

I am a firm believer that 99% of the time the market will do precisely what will screw over the majority of the traders, with that in mind, there are two scenarios.

Scenario 1: Bulls get it right
~ The rally continues, fueled by Fed liquidity, news of governments around the globe getting a handle on the Covid19 situation and other transient thoughts and hopes. Despite all rational thought, the markets rally.
~ The first target would be above the 200 moving average and the 78.6% fib level, at this point the market would have to be on crack, but it is possible.
~ Believe it or not though, this is NOT the craziest target i have, it may sound insane, but i do believe that under the right circumstances, market could challenge prior highs, certainly filling the gap present at the 90% retracement.

Scenario 2: Bears get it right...finally
~The rally rolls over and at least the market retraces to the 50% level from here, potentially between the 38.2% and the 61.8% range.
~The more extreme scenario sees the same move lower, but instead of stalling within that range, the market drop sharply to prior lows, potentially even taking them out.


I mentioned the pains of putting on the bearish plays on SPY , while it is no fun to lose money, it is worth noting that my net position is relatively unchanged due to the two BULLISH plays that i also included, funnily enough both on WES .

So whilst i do believe that the bears and indeed reality WILL prevail in the end, i am no fool to the powers of the Fed's liquidity hose, and neither should you.


-TradingEdge

Comments

Thank you
+1 Reply
Wow, I like your analysis. You are right, we should not under estimates the power of the FED for now, therefore I believe that the market will do well for the short time is coming and we may see another ATH in the near future. but in the long tern the market will have to face reality witch is a grim one for the economy. Good luck all.
+1 Reply
@ebe1992, Couldn't agree more, i believe that a retest of ATHs will likely be the result of massive liquidity injections into the markets, with the knowledge that those trillions of dollar MUST go somewhere, the best play i can see to play that scenario is to buy gold.
+1 Reply
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