My Watchlist [83]: SPY... Bull Trap to 446.09? (SELL)

TBITrades
04-03

Hi everyone! Today I’ll be updating my TA on an ETF known to all:

SPDR S&P 500 ETF Trust (ARCA: SPY)

SPY has continued to form a bearish divergence, which has since extended from 3 to… 6 legs! This is unlike anything that has ever formed on SPY before. However, in most cases, bearish divergences on ETFs tracking the market indices play out. This suggests that we might be looking at a multi-month pullback instead of a shallow correction.

The latest development on SPY is that it has since broken out of its rising wedge, while testing the 1.618 Fib extension at 522.17 which I talked about in my previous newsletter on SPY. While we are currently trading over this level, SPY continues to reject the rising wedge and is unable to get back into it. This means that the ideal outcome for bears is for SPY to gap down below 522.17 and either continue to head lower or to retest this level from below, reject it, and head lower.

No 522.17 break, no bueno.

For me, the key level to watch on SPY for now is 508.56 because of the strong accumulation that has been seen at this level. I foresee that there will be a strong bounce here before a move lower.

Most bulls are still calling for 5400s and higher before a major pullback. However, the signs are there. And the market does a 360-degree turn just when you are really bullish.

However, why do I say its a bull trap to 446.09?

Simply put, I see a retest of the island gap that we made in Nov’23, as well as the trendline dating back to the pandemic low. However, given the highly contrarian nature of this analysis, we have to take this week by week.

What I can say is, if we fail to hold this gap, it will be problematic for the entire market, and the likelihood of a stock market correction similar to the bear market of 2021 and 2022 is very high.

Sentiment: SELL

Summary (with Price Targets - NFA):

  • Rising wedge breakdown with a near-term measured move to 508.56 (strong support) and a multi-month measured move to 446.09 (island gap support). A breakdown below the latter will see a major undercut of the October 2022 (~ 348) low.

  • Investors can consider trimming their positions at current levels and look to add more further down, or to buy protective puts/utilise options strategies to preserve capital in the meantime.

All right, that’s all for this newsletter. Till next time!

$SPDR S&P 500 ETF Trust(SPY)$ $Invesco QQQ Trust-ETF(QQQ)$ $Apple(AAPL)$ $Tesla Motors(TSLA)$ $Microsoft(MSFT)$

@TigerStars @TigerWire @TigerEvents @CaptainTiger @MillionaireTiger

Can We Expect More Gains in Q2?
S&P 500 is poised for a nearly 10% price gain in the first quarter, with a remarkable 30% rally from its October 27 low. This strong start has prompted investors and strategists to consider market correction. However, data from 1970 suggests that such strong beginnings often indicate a continuation of the rally, with the S&P 500 historically showing an average first-quarter gain of 2.5%. When the index outperforms this, the second quarter typically sees an even higher gain. ----------------- How do you expect the performance in the rest of the year?
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