SPY: So Overbought That You Have to Buy
The markets have made an impressive rally over the last few weeks, practically setting historical records for markets in many sectors.
The recent pullback is welcomed as the SPY approaches my monthly zone. Whenever I set my levels, I use the applicable time frame and mark out the major candle opens, and closes to determine my support or resistance zones.
As you can see, we are right at that level which should provide for some resistance. I would expect the price to move into the liquidity zone I have marked out with trading history since 2021 at approx 450-460.
If we can confirm this level as support, to me this just looks like an epic cup and handle pattern with targets approx 20%-30% higher. Additionally, if you look at examples of this pattern online, you may find that there are probabilities of a potential squeeze coming after the breakout.
The FED has already projected rate cuts next year. Unless we have some devastating news, I don't quite see a reason for markets to have a major crash at the moment. Part of the reason behind my squeeze theory is due to the fact that we are approaching uncharted territory on the chart, and its likely we will start getting better information about the economy moving forward and inflation coming down (although its possible that inflation may come in waves larger in the future).
If the current market meme's give us any idea, it might just be a repetition of what we saw as the markets squeezed and recovered in 2020.
The recent pullback is welcomed as the SPY approaches my monthly zone. Whenever I set my levels, I use the applicable time frame and mark out the major candle opens, and closes to determine my support or resistance zones.
As you can see, we are right at that level which should provide for some resistance. I would expect the price to move into the liquidity zone I have marked out with trading history since 2021 at approx 450-460.
If we can confirm this level as support, to me this just looks like an epic cup and handle pattern with targets approx 20%-30% higher. Additionally, if you look at examples of this pattern online, you may find that there are probabilities of a potential squeeze coming after the breakout.
The FED has already projected rate cuts next year. Unless we have some devastating news, I don't quite see a reason for markets to have a major crash at the moment. Part of the reason behind my squeeze theory is due to the fact that we are approaching uncharted territory on the chart, and its likely we will start getting better information about the economy moving forward and inflation coming down (although its possible that inflation may come in waves larger in the future).
If the current market meme's give us any idea, it might just be a repetition of what we saw as the markets squeezed and recovered in 2020.
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My Trade Plan Note
The long term picture Note
Coming down nicely, losing the value area of the previous range. We have one big green candle up and may be likely we see a sharp move back before a relief rally and ultimately down to our demand zone. Note
Seeing some divergences forming Note
Would consider this scenario for January leading into spring. Move up forming a bearish head and shoulders, target zone would match my demand zone confluence. Anywhere from 450-460 could be a good buy zone unless we cant find support there and break lower. Note
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Trading the plan, invalidation is the high of the last pivot. Note
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Will be waiting for CPI tomorrow before placing any trades. A good CPI can potentially bring us up higher towards the all time highs.Note
CPI gave the market a bit of a scare. You can notice the weakness from the reaction. Although PPI came in cooler I still feel like the market is currently overbought. I have placed short trades on the Nasdaq and SPY. I will be following and re-entering positions around 450 range on the spy as per my plan.
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I believe the high is in. We tried to breach it twice and wicked above the level for a swing high pivot. I believe the drop may come quick a fast to $455, which will be a great place to long. Note
Depending on the market context and reaction ie. do we create a gap down today , or fill the gap, we may perhaps see a move similar to this off the demand zone below. Note
Clearly no real resistance here, up we go which was my expectation. Surprised we have not got any real pullback before. Either way, long term loves this move.
Trade closed manually
Looks like we hit our overall target. Will be looking for some potential downside at the moment.Note
Opened up some more shorts to hedge the market. We may be looking at "So Overbought that you have to sell"
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