chuckination

S&P 500: Risk On for a V-Shaped (or Upward Sloping W) Recovy

Long
AMEX:SPY   SPDR S&P 500 ETF TRUST
I'm calling a new Bull market, and that was born on April 6, 2020 when the S&P 500 broke out from the downtrend channel of the COVID-19 black swan event. I went long on that day and have been happy with the results, and now after the indices have survived their first major test of the possible new lows into earnings season, it does appear to be a risk-on type of environment.

I've made some money from the second wave off of late March's bottom, but I've had butterflies. I took some profits and spent some time reading the wind, and the last 2 weeks have been a major retest of the indexes as they were rangebound for a short term. Now that the S&P and others have broken out, it's risk on again for yours truly. I'm personally look at AMZN (they report earnings tomorrow) as the canary in the coal mine if this V-shaped bounce off the March 23 bottom isn't just a very hard bouncing cat, but I think even Schrodinger would have a hard time telling if this kitty was alive or dead. You decide that for yourself.

The price has broken above the 50 day average and is beginning a retest of the 200 and 252 days avgs (I like the 252, it's the avg of the trailing twelve months) is narrowing some, but that's natural after the first successful retest of a baby bull. This first dip stayed below a threshold of 5%, so didn't even touch the lightest of hand's stop loss. Long term stochastics show it moving into an established movement, and we're likely to run until a retest at 3150 which would be the peak of the February 2020 bull trap. I plan to take profits near that zone depending as we approach the apex of the ascending triangle where we could have a pullback anywhere from another 5% all the way to 15% or more. RSI shows we're not yet overbought (it's still early in the up trend for that anyway), but keep your eyes peeled and be ready to act quickly on fast, large moving changes in the coming couple of weeks.

Any shocks or melt ups will likely be news driven, and the larger they are, the hard they are likely to snap back toward the center of the new trend channel with some momentum.
Comment: Today was a bad news day, and the futures are pointing for tomorrow to be as well. We'll have to see how the week closes and next begins before I decide if I was wrong or not on this first call.
Trade closed manually: I thought that exceeding the prior high was a strong bullish indicator, but it was just one last gasp before the downturn. A few things in my portfolio stopped out, and I just closed the rest manually.

I'm not comfortable saying that the baby bull is dead, but it sure looks like veal to me.

Comments

I like your analysis! I feel like this is a totally bull trap till it reach a certain flush point.
Reply
ebe1992 heatherntv
@heatherntv, I second that, agree with you and the author.
Reply
chuckination heatherntv
@heatherntv, April 5 and April 26 weren't enough tests of a possible flush point?
Reply
heatherntv chuckination
@chuckination, I personally think this market depends on news and fed money. The real flush point is when the fed has no more money or good news to recuse biz anymore since the vaccine is still a long way.
Reply
j0turne heatherntv
@heatherntv, the FED literally said, "we have unlimited money."
+1 Reply
heatherntv j0turne
@j0turne, thats the ugly truth.... our tax money
Reply
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