Bears Wait To Demolish The Bottom Buyers! S&P 500 (SPY)
Hi friends! Welcome to this update analysis on the S&P 500, via the SPY ETF. Let's get right to it!
Looking at the daily chart, you can see that after the monstrous breakdown from the head and shoulders pattern, the SPY printed a massive bounce yesterday on the chart. It was basically a huge bullish engulfing candle. HOWEVER, I am NOT a buyer of this dip. As I've said on many other occasions, I believe that the top is in for this market. If we see a continuation higher today, it will likely just end up being a dead cat bounce.
So, where are we going? Well, it's kind of hard to tell right now. In the longer term, I believe that the market is most certainly going to breakdown, but in the immediate future there are a number of things that could happen.
1. We consolidate sideways here, building a massive bear flag. As you can see, I have already drawn a bear flag on the chart (in black.) I look at it like this, the market is just above major, major, MAJOR support. That support is the bottom of the parallel channel (in blue.) As I've said on many other occasions, price can often build powerful bearish formations above powerful support levels. It's like the market's way of generating enough momentum to smash through that support. The same thing could be happening right now in Bitcoin. On that chart, the 50 EMA has been a wall of resistance for months. It currently appears to be forming a bullish formation just below the 50 EMA. So, if that formation actually produces an upside breakout, Bitcoin will have built up enough momentum to explode through what has been powerful resistance. Here on the SPY chart, the opposite could be true. This channel originated in 2008, during the collapse of the financial crisis. It's a decade old. So, the market is very likely to coil up, and build some major momentum before breaking down from it.
Now, it's a bit too early to know for sure if this is a bear flag. So, we would need to see a few more days of data, where price continues to trend sideways.
2. Price could break out above yesterday's high. That would most likely negate a bear flag here and it would show that price is likely to head higher. On the upside, you can see that there are a few pivot low resistance levels, but the big upside resistance is at the neckline of the head and shoulders pattern (in red.) With that said, there is a potential that price could rally up there, but we would need to see a strong close above yesterday's high to confirm that. Either way, this market is in a very fragile state.
Since the RSI has just recovered from oversold territory, it is likely that the RSI will continue to gain ground in the short term, or at least stay above oversold. So, let's see if price stays inside of the flag area of this potential bear flag. If it doesn't, a breakout above could produce a substantial rally. In my opinion, that would be more of a selling opportunity than anything.
Happy New Year Everyone!
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-
Looking at the daily chart, you can see that after the monstrous breakdown from the head and shoulders pattern, the SPY printed a massive bounce yesterday on the chart. It was basically a huge bullish engulfing candle. HOWEVER, I am NOT a buyer of this dip. As I've said on many other occasions, I believe that the top is in for this market. If we see a continuation higher today, it will likely just end up being a dead cat bounce.
So, where are we going? Well, it's kind of hard to tell right now. In the longer term, I believe that the market is most certainly going to breakdown, but in the immediate future there are a number of things that could happen.
1. We consolidate sideways here, building a massive bear flag. As you can see, I have already drawn a bear flag on the chart (in black.) I look at it like this, the market is just above major, major, MAJOR support. That support is the bottom of the parallel channel (in blue.) As I've said on many other occasions, price can often build powerful bearish formations above powerful support levels. It's like the market's way of generating enough momentum to smash through that support. The same thing could be happening right now in Bitcoin. On that chart, the 50 EMA has been a wall of resistance for months. It currently appears to be forming a bullish formation just below the 50 EMA. So, if that formation actually produces an upside breakout, Bitcoin will have built up enough momentum to explode through what has been powerful resistance. Here on the SPY chart, the opposite could be true. This channel originated in 2008, during the collapse of the financial crisis. It's a decade old. So, the market is very likely to coil up, and build some major momentum before breaking down from it.
Now, it's a bit too early to know for sure if this is a bear flag. So, we would need to see a few more days of data, where price continues to trend sideways.
2. Price could break out above yesterday's high. That would most likely negate a bear flag here and it would show that price is likely to head higher. On the upside, you can see that there are a few pivot low resistance levels, but the big upside resistance is at the neckline of the head and shoulders pattern (in red.) With that said, there is a potential that price could rally up there, but we would need to see a strong close above yesterday's high to confirm that. Either way, this market is in a very fragile state.
Since the RSI has just recovered from oversold territory, it is likely that the RSI will continue to gain ground in the short term, or at least stay above oversold. So, let's see if price stays inside of the flag area of this potential bear flag. If it doesn't, a breakout above could produce a substantial rally. In my opinion, that would be more of a selling opportunity than anything.
Happy New Year Everyone!
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-
Comment:
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