In my analysis of the weekly chart of SPY I call for a decline through the end of the year. The purpose of this analysis will be to pinpoint high probability entry points to take advantage of the long term forecast.
On Thursday and Friday June 27 and 28 prices settled into a $2 range between $160 and $162, exactly in the middle of the trend channel. Traders should be cautious to enter trades here as probabilities of a break in either direction are about equal. Waiting for high probability entry points that allow traders to place tight stops is critical to ensuring long term profitability.
The yellow and purple triangles highlight potential price movements for the month of July. In the next week it is difficult to say, with any certainty, in which direction prices will break out of the $ 160 to $162 range. Momentum from the short term up wave beginning June 24 suggest prices could reach the upper boundary of the trend channel sooner rather than later, while the distribution patterns on the daily and weekly charts suggest further declines. It is also possible to see prices continue to move sideways within the range.
However the push and pull of prices plays out over the next week to month, traders are advised to wait for prices to test the boundaries of the trend channel before entering positions. There are two scenarios I am looking for which would justify entering a short position in the next month.
First, if prices continue sharply higher in the next week (on continued weak ) and test the downtrend line and resistance around $164. This is the ideal situation, allowing us to place a tight stop above $164. As I stated in my long term analysis last week, $164 is the last before I will re-evaluate my bias ( SPY Down Through Year End).
Second, prices may decline this week to test the lower boundary around $157 - $158. In this case, I will be watching for a rally to resistance and the 50 day moving average around $162 to get short.
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