Hi friends! Welcome to this update analysis on the S&P 500, via the SPY ETF! Let's get it! Looking at the weekly SPY chart, we can see that price appears to be forming a possible head and shoulders pattern, as sell side activity rises in the market. In order to assess the potential for this pattern to complete itself, we conveniently have the 50 EMA (in orange) just below the current price action. We can use the 50 EMA as a gauge, to monitor the likelihood of this pattern completing itself. Looking from right to left, you can see how many holds the 50 EMA has provided in this bull market. If we begin to break back down below it, I believe that the odds of SPY completing the head and shoulders pattern, and producing a breakdown, are relatively high.
On the MACD, you can see that it has printed a significant bearish divergence. So, from a technical standpoint, SPY appears to be facing increasing headwinds. Fundamentally, there is a real concern that companies have maxed out their profitability in this economic cycle, and that appears to be reflected in the price action of the S&P 500. With that said, this is still a powerful bull market, and short positions should be executed with extreme caution. Personally, I will be watching the action around the 50 EMA, to assess the likelihood of a completion of the head and shoulders pattern, with a subsequent breakdown. If the head and shoulders pattern does break down, price could easily plummet to the 200 EMA (in purple,) which would be around the low $240s.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
On the MACD, you can see that it has printed a significant bearish divergence. So, from a technical standpoint, SPY appears to be facing increasing headwinds. Fundamentally, there is a real concern that companies have maxed out their profitability in this economic cycle, and that appears to be reflected in the price action of the S&P 500. With that said, this is still a powerful bull market, and short positions should be executed with extreme caution. Personally, I will be watching the action around the 50 EMA, to assess the likelihood of a completion of the head and shoulders pattern, with a subsequent breakdown. If the head and shoulders pattern does break down, price could easily plummet to the 200 EMA (in purple,) which would be around the low $240s.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-