I’m a trader. My trades can last anywhere from 30 minutes to 30 weeks so I don’t need to add my opinion as to whether or not ‘the low‘ is in for the market or not. Doesn’t really matter to me. It’s a concern for long term investors but again, that’s not me. That doesn’t mean that I don’t care whether the longer term charts have a bullish or bearish bias because they are like the ocean tide. Even if I’m just swimming a short distance I’d rather be swimming with the tide than against it! On the weekend I look at longer term charts such as yearly, monthly and weekly in addition to the intraday charts. I’ll start with the weekly. The weekly trend is bearish in 3 of the 4 charts below. The HB (Half-Back) chart is neutral. While the trend is bearish price does have room to still move higher before it hits resistance so a continued rally is not out of the question.
The yearly chart appears to be mildly bullish up to the 4225 area where there is likely to be strong resistance. The last 5 days looks like a bull flag which should resolve higher. Of course, keeping an open mind, should price breakdown below the bull flag low around 4075 then that would be a very bearish development! Nothing more bearish than a failed bullish setup and vice versa!
I could show the daily charts next but I don’t need to. The yearly chart that you just looked at has daily candles shown and you can see the bull flag clearly and the important levels should price breakout or breakdown. My long term breakdown target remains at last year’s 3662 low.
Finally, below is a 5 minute chart of SPY. Quite a jump going from weekly and daily candles all the way down to 5 minute candles! I don’t trade off the 5 minute charts but it’s like looking at the price action from 30,000 feet up in the air. That ‘bird’s eye’ view of the current price action looks like a potential failed breakout of the bull flag in the last few minutes of trading on Thursday with Friday’s price action being a bearish descending triangle. And May’s HB (Half-Back or the midpoint) is just below at 405. I view HB as a proxy representing the fair value for a period time. That means that 405 is approximately fair value for all trading in SPY for the month of May. Pretty important level since above that level and the bulls are winning and below that level the bears are winning. Since price has been gaining acceptance above HB then the next target higher should be May’s high just below 430. In order to reach that target price must first break out higher from Friday’s bearish descending triangle and then break out above last week’s bull flag. There are definite price levels associated with those patterns that I can monitor on the charts! I can follow the price action and determine if the bullish case is playing out or not. On the other hand, should price instead breakdown below the descending triangle followed by the lower support of the the bull flag failing as support and price continuing below May’s HB I’ll turn aggressively short using the HB level as the bull bear line. My target if that happens? May’s 380 low! Stay tuned!
