To The Moon

I'd like to shed light on the current trajectory of the $SPDR S&P 500 ETF Trust(SPY)$ $S&P 500(.SPX)$ , particularly since its August 2022 lows, and what you might expect in the near future.

A Remarkable Rise Since 2022

Since hitting its lows in August 2022, SPY has exhibited a remarkable upward trend throughout 2023. This rally has been impressive, leading to the creation of all-time highs. However, in this world, what goes up must come down – at least to some extent.

Potential Retracement in the Offing

Current market analysis suggests a decent probability that SPY will retrace back to the mid-460s in the coming weeks. It’s important to note that this doesn't preclude SPY from reaching even higher levels first. However, the likelihood of a downward correction seems high. For traders, this means considering the de-risking of equities, especially depending on your current market positioning.

Understanding Market Dynamics: Diagonals and Corrections

The climb of SPY has been somewhat choppy, leading me to view this rise as a diagonal pattern in the making. In technical analysis, a diagonal is a motive wave pattern found in Elliott Wave Theory, often occurring in the fifth wave or the final wave of a sequence. This suggests that in the next 23-28 months, SPY could potentially reach prices as high as 550-575. Given that we're only at 483 today, this presents a significant growth opportunity.

Strategic Moves for Traders

Should SPY decline to the mid-460s, it would present an excellent opportunity for traders to add risk to their portfolios. However, it's crucial to stay vigilant. Market conditions can change rapidly, and global events often have a significant impact on the market. A key factor to watch is the dollar index, which measures the value of the U.S. dollar against a basket of other currencies. A declining dollar index typically bodes well for equities, as it adjusts for the decreasing buying power of the dollar.

What to Look Out For Next

Watch for a corrective move down to the mid-460s, followed by a rise that could go up to 510-525. After reaching this point, a steep decline back to the mid-460s is likely, creating prime buying opportunities. This is anticipated to set the stage for a bullish move towards the ultimate 550 area.