To The Moon

Hi everyone. Today I’ll be giving a monthly update on the S&P 500 ETF:

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

This time round, I decided to take a simpler approach to analyse SPY. Let’s center our analysis around the “COVID-19 Trendline” (green channel) - a trend that has been intact since the COVID-19 lows in Mar’2020. SPY subsequently broke out of the green channel and had a markup in trend (yellow channel).

After breaking down from the yellow channel, SPY retested the breakdown before trading in a descending channel (in red) with lower highs and lower lows. It found support at the green channel support before making a full recovery.

SPY traded in the green channel for about a year or so before breaking out of consolidation into the next markup (in yellow).

It was trading in this channel for about 9 months before it broke down from the yellow channel. Currently, we are seeing a backtest of the breakdown. The Stochastic oscillator is almost at extreme overbought levels, with risk-to-reward skewed towards bears.

Based on prior supports, I am now expecting a very heavy selloff into strong support at the 493.56-494.11 area, where we should bounce and attempt to form a lower high. Ultimately, I am expecting SPY to continue making lower highs and lower lows until we retest the green channel support trendline, per previous price action. In other words, a fractal of the 2022 bear market.

In previous newsletters, I’ve reiterated the Jul’23 high as a target, and that is not expected to change in this newsletter. My downside target remains 459.44.

In light of current price action, I am favouring downside into seasonal weakness, and downgrade SPY to a SELL from my previous sentiment rating of HOLD.

Sentiment: SELL (Downgraded from HOLD)

Summary (with Price Targets - NFA):

• Retesting channel breakdown from below, with a short-term target of 493.56-494.11 and a longer-term target of 459.44 (Jul’23 highs)

• Current price action is a fractal of the 2022 bear market, with a bearish window opening up into the election

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