SPY/SPX - Road Map

The market tries to give hints about what direction it's heading by giving us pivot points . If we look back over the past couple months, we can see a point of confluence where price action looks like it got into a really bad accident. Immediately prior, it took a spill and formed an ascending triangle . The point of confluence is the juxtaposition of FANG (and similar stocks) and the other 99% of the S&P . FANG is flying high every day. The other 99% of the S&P (the dead weight) felt resigned to accumulate a nice steady upward trajectory ( ascending triangle ) -- you can see these patterns all over the index. The high flying tech stocks however, are a component of the S&P and they've made the index 'drunk'. Hence the the overly zealous breakout of the the ascending wedge . But the index is schizophrenic, it has two dichotomous identities. And we see that with the quick rise and fall of Apple paired with the steadily rising banks and manufacturers. With big tech taking a back seat, I think the S&P is reverting to the other 99%o of the index. Monday and Tuesday will tell if we see a bounce off of the top of the ascending triangle and further test of it's ascending leg. This is the image we expect of a market coping with a pandemic, social & political upheaval, and major unknowns (yet cautious optimistic) about the economy.
Comment: First bounce today. Trajectory illustrated above has us attempting to test previous highs. There would have to be a massive shift in momentum for the pictured version to occur. Thinking now, if Tuesday is a repeat of Monday, we'll drop down to test the ascending triangle (335-340). A long lower wick beneath a candle diving through the lowest support test point should create a bounce. in what direction? That's for us to find out tomorrow. Not expecting a massive 10% dump as others are. But be ready for anything.
Comment: Got that second bounce confirming the ascending triangle (which is really just a 200 SMA. Price action looking like it will peak somewhere around 347 in the next hour, then back down to re-test lows.
Comment: Nice little consolidation channel developing to get momentum build. 348 is a theoretical target. Volume is incredibly low today so it's hard to get a read on where the market is going to take us leading into Wednesday and Thursday. Buyers are definitely thinning out. Probably going to backfill a lot of these price zones we flew thru over the past 6-months until we hit the 200 SMA low.
Comment: Microsoft is breaking down. May not hit our target after all. Not sure I want to open a short in the middle of this slough. No intention of holding short overnight due to impending congressional news. A LONG bet would be far safer.
Trade active: SHORT: $346.50
Hit a high of $346.88

Price action approaching the countertrend resistance line had a bearish round top. Market is running out of energy? Again, it's a low volume day and a lot of sidelined cash is waiting for Congress to publish the next round of stimulus.
Comment: Wherever price breaks about about noon today is our new trajectory. Long, short... don't konw! Market hit every pivot point I've identified up above so far. If I were to guess, we'll be breaking up and out of this ascending triangle. I wouldn't expect a bullish rally though. Seems like consolidation at these prices is necessary. if we break below, target 320 area.
Comment: Closed Short $341

There's definitely some room left to fall at these levels. Quite possibly significantly. The coiling pattern developing made the choice to close early yesterday a little easier to swallow. Price could fly up or down rapidly. If I were to update this road map, I'd incorporate the cup & handle mentioned by another poster. Everything is pointing to this being a pullback before we continue our major trend (up). I'm in cash until this coil resolves itself. I imagine it will have profound effects on other stocks across sectors. Keep your eyes on the descending wedge developing.
Comment: This post is concluded.


Great post, keep going!
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