whiteknightmoving
Short

SPY SPX -Truck Driver Gonna test the underside of the Red Line?

AMEX:SPY   SPDR S&P 500 ETF TRUST
Since the bull market started in 2009, the Red Line Channel has held as support. However in Dec 2018 the lower support channel was broken! Support obviously failed with the huge Dec sell off.
Since the Christmas 2018 lows, the market has moved up strongly. Now, Many traders have become extremely bullish . Eyes on 3000+ SPX now. Blogs and tweets, and professional sites have begun to talk about the new 5th wave up to all time highs ... into the 3500's ???
Wow! Very exciting to be sure.... but....

Let's keep things simple.
Basic "Old School" trading teaches that former support, once broken, then becomes resistance.
It doesn't matter if it is a 5 min chart, 1 day chart, or a Weekly chart.
The Red Line shown at the top of the chart, IS a strong resistance zone to watch. It is now about 10 years old! Has it's support been broke before?
Yes, but only recently!... in Oct-Nov 2018. The market played the upper and lower sides of the line, until the Dec 2018 sell off made it real clear to the downside!

Now, let's think of a big rig truck driver(the market), with a heavy load, quickly going down the steep grade in December. Remember when he "ran over" a lot of little cars (stocks) on the way down in Dec ?
Let's visualize how the downward momentum gave him a lot of speed to quickly climb the Jan 2019 upgrade that we see.

Now, If you would be so kind as to also notice the upward slope of the black channel since the Dec 2018 lows.
I see an impressive thrust up (in the beginning) to the upper side of the black channel as circled in green. Very nice! Momentum is helping the driver up quickly ... for a short while... until the truck driver had to shift down a few gears.

Later in Jan 2019, we see the price did shift lower, and we see the mid line become a magnet for the price trend to continue with a steady upward movement, although not as steep as the green area. (I have circled this area in yellow). Think of a truck climbing a long upgrade, the truck driver had to shift down a few gears to continue up, but he's losing momentum now!

Now recently, the price broke down again and shifted to the lower side of the black channel. (I have circled this area in red) Market Price has been consistently bouncing above the lower black channel. The trend is getting weaker and weaker... (just as we approach the underside of the Red LIne!)
The truck driver is now in the low gears trying as hard as he can to pull the load to the top of the mountain. His "4 way caution flashers" are on in the "slow lane". Little cars and pickup trucks are passing him. He is getting slower and slower, as he crawls along pulling the market up this steep hill! It's not so easy right now. The price is just slowly bouncing along the lower black channel.
Prices are getting near the top of the grade! - Into the sell zone near the top.
The market is a heavy load to pull up to the Red Line sell zone for sure. Those "4 way flashers" are a serious alert for us! When we see a break of the lower black channel, the driver has probably crested the mountain and will begin the steep decent on the other side soon.
I am biased. I do have puts on the market. I am bearish .

God help any little "4 wheelers" in the way of the massive market truckload. After the truck crests the top, the downside of this mountain It's gonna be scary! Air horns honking loudly may not be enough!
- Old Fart
Nice analysis old fart. One of your better I think you are on point. I see us hitting 2814 SPX then down
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whiteknightmoving mattgetsbarreled
@mattgetsbarreled, Yep! getting dangerously close to highs now... watch the lower black channel line to start cracking soon
+1 Reply
mattgetsbarreled whiteknightmoving
@whiteknightmoving, i think the trillion dollars injected into the market via buybacks will provide more momentum than us bears expected and keep the market on life support for sometime. With a crash in June / July timeframe. That’s why I updated my analysis on my page
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