SPY Bear Trend DaySince printing a SL on 2023-08-18, AMEX:SPY had retraced 38% of the 2023-07-23 decline. Selling pressure remained heavy; though three of the four candles were positive, every bar dipped into the body of the previous bar approximately 50%. So while it seemed like a BTD, it did not seem like there was market consensus prices here were too good to pass up.
We have DTLR connecting the 2023-07-23 and 2023-08-10 SHs with three tags total but none since Aug 10. In pre-market, SPY was looking to open at $445 which was just over DTLR.
On the H2 we can also identify a descending price channel. This channel has two positive outliers and eight tags going into Aug 24 along channel resistance. Support had been broken on Aug 16, successfully retested shortly after, but was retested again where it failed on Aug 22. Since, we've been back in the channel.
On the H1 I also have marked an ascending channel off the Aug 18 L. Channel support was tested four times; resistance only once though four times if you're a little more generous (I'm not specific with how close price has to come which probably could be better).
We also have support from the 2023-08-11 O which was tested several times before failing on Aug 15, tested again from below on Aug 16. It was reasonable to expect some type of inflection here, I thought.
I had posted an idea to TradingView yesterday morning that stated the following:
SPY is $1.67 from a slightly-ascending SMA(50) only a little further from a descending SMA(20). Yesterday's close was a HH and HC and the highest since Aug 14.
As of this writing, SPY is looking at a FGU over the 50. I will be watching the gap to see how SPY reacts. On the hourly I have outlined a rising channel that, if the current forecast open of $445 holds will be above channel resistance. This strongly suggests the gap will fill early and, my best guess is, completely. At that point we can assume a risk-on position at least from a day-trading perspective. But, we must see the reversal first.
There is potential support on the H1 at $443.85 which is the 2023-08-11 O. Next support is $442.60, the 2023-06-15 C. This level has seen several instances of some type of reaction. So no reason to think otherwise. And then from there, $441.18, the 2023-08-22 O.
Until channel support breaks, long positions may be held as swings while short positions should be day trades only.
Mentally, I was not in the frame of mind to look for a short. During the rally on Aug 23 I had kept expecting the market to turn over but it just never did; I was focused more on what I wanted than what I saw. I have not seen enough evidence to be convinced the Aug 18 pivot was a BTD moment for the reasons mentioned above. And, though I wasn't looking for a deep PB, I was looking for something. So, I went into yesterday morning with the idea of just letting the market dictate to me what it wanted to do. But, when I saw the open, again remembering shorting the Aug 23 rally, I saw it as an opportunity to BTD, even knowing the obstacles ahead. I just was not in the right frame of mind.
When the market opened we got an immediate gap fill which, as I wrote above, I was expecting. The market printed a reversal doji, got the FT, and retested the O where it printed a new HOD on the 10:00 bar.
The key bar, obviously, is the 10:05 bar. This bar completely wipes out nearly all of the gains off the LOD. It is the largest bar of any color, in quite some time (unverified; I do not have the stats). This is a signal bar! Off a double top, the market is screaming "we're going down!". (One could argue the 09:55 bar was the signal bar with the bearish doji and the 10:00 bar was the entry bar.)
For thirty minutes we fell with only two retracements into the previous bar. From there until into the 12:00 bar we get small corrections that barely tag the 9EMA.
Beginning at the 12:00 bar we start to get a bounce and now we see where late-arriving sellers are trapped; the easy money is over and the early sellers start covering to protect profits. We get a steep rising channel that surely can't be held, printing a zigzag that retraces 25-30% of the decline. From there we work out a descending triangle that devolves into a descending price channel before finally breaking down going into the end of the day.
Sellers can certainly consider the day a win. It doesn't mean anything without FT. I strongly suspect we get it as I'm sure most of the market does, as well. Which, perhaps, makes it more likely it's just a fluke. We'll see. Some retracement is likely. But new resistance has been set and it's now on buyers to tell us if we are actually in a BTD market or STR.
