This rally to me seems to be on it's last legs with all the positive catalysts priced in. Nothing however seems to do much harm to the current trading level, for which I believe the biggest cause to be that Smart money is not supporting this rally and it seems to be driven by retail/excessive speculation and of course elevated FED/government support.
Looking at the chart from a long-term perspective:
- Since the bull run as off the late 2009's SPY has pretty much respected the EMA 250 on the daily as support
- Breaks of the EMA 250 led to a bigger than normal correction as seen in the end of 2018
- We consider the corona virus crash in March 2020 to be a black-swan event and the green line to be the long term trend, as shown in the chart with 6 touches. This level also served as resistance on the way back from the March 2020 bottom as circled which gives it even more validity
- Pitchfork shows SPY is currently trading outside of it, the March bottom was an over-extension to the downside as well so this would basically level the red pitchfork median with the green trendline
- Technicals are showing bearish divergence on the MACD, RSI and volume
Personally there is little risk to reward to the upside, therefor we wait for a long opportunity when it presents itself expected at point 7 in the chart. It will be difficult to maintain EMA 250 support at these elevated levels so a steeper than normal correction is in my playbook. At this time I'm sidelined with 2/3 of my cash waiting for the moment to go long again when the time is right. I am not a bear by any means but to me the market cannot sustain these highly elevated levels.
As always not advice and trade at your own discretion.
To be continued...
Looking at the chart from a long-term perspective:
- Since the bull run as off the late 2009's SPY has pretty much respected the EMA 250 on the daily as support
- Breaks of the EMA 250 led to a bigger than normal correction as seen in the end of 2018
- We consider the corona virus crash in March 2020 to be a black-swan event and the green line to be the long term trend, as shown in the chart with 6 touches. This level also served as resistance on the way back from the March 2020 bottom as circled which gives it even more validity
- Pitchfork shows SPY is currently trading outside of it, the March bottom was an over-extension to the downside as well so this would basically level the red pitchfork median with the green trendline
- Technicals are showing bearish divergence on the MACD, RSI and volume
Personally there is little risk to reward to the upside, therefor we wait for a long opportunity when it presents itself expected at point 7 in the chart. It will be difficult to maintain EMA 250 support at these elevated levels so a steeper than normal correction is in my playbook. At this time I'm sidelined with 2/3 of my cash waiting for the moment to go long again when the time is right. I am not a bear by any means but to me the market cannot sustain these highly elevated levels.
As always not advice and trade at your own discretion.
To be continued...