Bullish but Bearish SPY Chart
This week could bring some much-needed relief, but for how long?
Last week we looked at the the monthly charts for each of the Magnificent 7 stocks and the candles said it all.
If these are the names that drive the market, there should be no surprise that it has been a rough start to the year as all of them have struggled and point lower.
That said, I do think it does feel like we are closing in on a near term bounce.
Markets can drop quickly but buyers also step in at various levels, taking advantage of lower prices. This is the bounce we can trade for upside, but only briefly.
We have seen this pattern before. A low is put in and it is followed by a retest which is then followed by new highs.
I think we are about to get that bounce to new near-term highs. I am not convinced that it will continue to new all-time highs. That’s a taller order.
Here is what I am talking about and what I think we are about to see for SPY.
Interestingly enough, last April we saw a near-term low put in and retested followed by a strong push higher. The pattern also showed up in October, retesting the low and powering to new all-time highs.
I do not think we are in any spot to call out a return to all-time highs. Instead, I think we put in a lower high and form a trendline lower.
The relative strength index (RSI) divergence continues, not a good sign for bulls.
If the trade you are considering is to the upside, profits should be taken relatively quickly and completely. There is no reason to tempt a reversal. Lock in those gains.
When SPY returns to consistently closing above the 5-day simple moving average (SMA) we can start to get more aggressive to the upside. Until that happens, it is best to be patient and to be very selective with your trades and sizing.
I will be quick to note when I think it is time to press the accelerator.
This week I have bull and bear thesis trade ideas for MARA which is retesting lows and will pick a meaningful direction in the coming days.
Here’s a snapshot of MARA.
We are also considering both bull and bear thesis trades for META, which is facing a retest of support right at the 200-day SMA.
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