SPY: Weekly Analysis

Hi Everyone,

Here is my analysis on SPY for this upcoming week;

Recap:
- SPY completed an inverted H&S pattern and successfully followed through with a bounce after bouncing off 362.
- The bounce off 362 and close at 364 placed SPY at -3.11 SDs, an area which generally causes an aggressive rebound bounce (anything under -3 SDs generally causes huge rebounds)
- SPY rallied pretty hard on Friday and filled the first gap, closing at around 390.
- Another sizeable gap remains on the daily at roughly 395 to 401 ish
- Tech stocks (tracked by QQQ) created a bull flag on the 1 hour chart which it has successfully broken out of.
- Inverse ETFs of SPY (SDS, SPXS and HSD) all created H&S pattern in response to SPY's inverse H&S and broke down.

See charts below for background to my analysis:


QQQ (Tech Stocks)

Created a bull flag with follow through as a break out. If pullback is in order on Monday (Which RSI tends to lend credence to this idea), look for support around 292 on this flag.


HSD (Inverse SPY on TSX, chosen because the gaps that were created are much more visible than on SPXS and SDS)

The sell off created an overhead gap that will likely get filled in the near future.
There is a downside gap that I anticipate being filled (the overhead gap on SPY).
There is a strong trendline support below that I anticipate contact to be made with and a bounce. You can see this area marked with the circle.

SPY Z-Score Chart

Here you see we bounced off of the -3 SD mark and are now stampeding towards -2 SDs.
You see previously SPY found resistance at exactly -1 SDs. However, as SPY remains overwhelmingly bearish, we can expect lower highs and I anticipate SPY to find resistance at around -1.5 SDs (area shaded with blue circle).
-1.5 SDs corresponds with an approximately SPY price of 404.

VIX Z Score Chart:

You see here the VIX played out exactly as predicted in my previous analysis.
That double top thing forming completed and we actually came to my target area in the 27s.
It seems like we could find support at 0.5 SDs, which is slightly higher than the previous low and would equate to a price of roughly 25$.


So, what to expect:
- I anticipate SPY to continue to be somewhat bullish, if SPY can for once in its 2022 life co-operate with the technicals.
- There was a TON of pre-market buying on Thursday. I anticipate SPY to want to make a bigger move up for the time being as the volume I saw on Thursday in pre-market hours makes me believe that this should be a more sustained bounce that we have seen previously. Here's hoping.
- The downward channel that SPY is following would permit SPY to go up to around 405. This also corresponds with the Z-Score resistance I see. Will it get that high? Maybe, maybe not, but I think its reasonable to anticipate we come at least somewhat close to this target. If we manage to see the high 390s, this would be my que to start scaling in more aggressively short (I already scaled in short on Friday, but I do anticipate more upside. This was just me taking out an insurance policy 'just in case').
- We could see some pullback Monday, RSI is oversold on most time frames that would permit somewhat of a pullback Monday. If SPY will stay true to this bounce then it would be a buy the dip kind of day *gasp!*

Trading Range for this week:

Trading range projected is between 373 and 399.
I like this range, it gives me hope that we could see this bounce completed this week and then start making our next leg down.

Closing Notes and Key Points:
- Bounce likely to continue. If you are long, I wouldn't get too shaken out by possible pullback tomorrow. Pay attention to the descending channel SPY is in and look for support there.
- QQQ chart and Zscore chart supports at least some continuation of this bounce.
- SAS trading range prediction also supports continuation of this bounce with a top end of the trading range being 399.
- It is possible SPY may want to consolidate for a bit longer and not immediately start a huge downtrend or go aggressively up. But lately SPY has been 0 to 100 so I won't hold my breath about it wanting to chill for a bit.




I think that's it.

Thanks for reading! And as always leave your questions/comments and critiques below!

Have a great week and trade safe everyone!

Comment:

I said oversold in reference to a pullback but I meant overbought.
Force of habit in this bear market :-).