I got the time this weekend so let’s play umpire and callsome balls and strikes to see if there is an outlook to bet on in the markets.
Overall, the markets are at a point where collectively they canbreak a trend and run quite a bit when doing it. Although I’m mostly in the doom and gloomcamp, I will be watching so I can change at prescribed areas.
Starting with my favorite indicator the SPY. This is a quarterly chart that goes back asfar as ThinkorSwim would allow.
1st thing I see is a bear flag formation and amarket that is just taking some time off the clock before a continuing movedown.
2nd thing is the target area when the market doescomplete this second move which is around $250. I get this spot from a level of support tested twice before, and it isalso roughly 50% away from the first or current low of about $350.
3rd item is where I think I may be wrong, andthat would be a quarterly close above around $425.
That’s my long-range story for SPY but as the time frame getsmaller and smaller, I may have thoughts that go against the overall thesis ofa downtrend.
For the Monthly time period, we have (1st) levelof support $360ish, an upper level (2nd) at around $410, and lastmonths (DEC) low of $375.
On the 2-year chart with weekly candle closes, the shorter-termpicture looks like there is an upper trend line (1st) for the top ofthe wedge, and a base level (2nd) of support in the $360 location. Currently on the weekly chart price is gettingrejected right at the upper boundary of the wedge. It really hasn’t been rejected yet, but sofar this trend line has held 3 other times so it’s a wait and see, if the priceis to bust through and stay above the (1st) trend line on weekly closes,the next spot is $410.
I’m willing to take some longer term PUTS on the SPY that expireMay 19. They’re going for about 16 bucksnow and if next week’s close gets above $400 I would add to that for another weeks’time at 50-50 investment ratio under $410. After that next week’s price, will either take off if not sucked backunder the trend line. The upside is thelower portion of the range at $45 down the chart. We’ll see how this trade goes on Monday when Isee the best time to spring it.
For the immediate future starting off the week the 3-monthchart with daily candles has a few items that interest me. (1st) is that trend line thatdefines the top of the wedge formation, (2nd) is the bottom of thewedge which held pretty nicely for a few weeks before sending price back to the(4th) trend line. Price was just up in this neighborhood for theTuesday open and it was rejected somewhat by the close followed by another tryon Wednesday. This time a pretty bigbeat down shot below the 200 DMA (3rd) and closing right on the 50DMA. Thursday followed through with agap down and what I would call a semi-doji which can be a signal of a change indirection. Friday was a gap and gosituation where the bulls battled back to close just below the 200 DMA.
So, Monday’s futures will determine my thoughts on immediatedirection starting out the week. If thefutures markets gap over the 200 DMA and 400 is achieved before the openingbell, I may not buy short term calls that expire sometime mid-week. If it starts flat, I’ll buy calls off the bell. Down open and on the way down, $393.50 to$392 is a good zone of support and where I would buy calls. Below that and I’m out with unloading anycalls I but I will have picked up those longer term Puts. The sell zone is going to be $400 ish withsome profit taking along the way before hand to get the seed money back. It could run higher if things get going.
IWM with the same quarterly time frame shows a littledifferent story.
1st item is a price of $172.50ish which price ranup to back in the mid 2018s.
2nd notable occurrence is $172.50 level rejectedany further gains in price twice before the IWM was able to bust through in animpressively explosive manner. Thencoming back to revisit the former breakout area in mid-2022 when it spikedthrough the support level a little bit, but now the price has rose back above supportlevels and are looking positive.
3rd thing is the top of the zone I would belooking for if this upward march were to continue.
Overall, this quarterly chart has a bullish look to it, andif the markets are to take off, the IWM index will be a leading indicator ofthat action.
The monthly time period shows the $172.50 level is provingto be pretty good support as the market is eating time off the clock in achannel, but still making a bear flag situation. Above the $186 level and I’ll start feelingdifferent.
The weekly closing chart shows another level of supportunder the $172.50 spot at (2nd) $164. The trend line (1st) for the IWMis similar the SPY, but when you look at recent closes (3rd), youcan see 2 weeks ago price got to and closed above the trend line at $187ish, then just last week, price fell away to close abouta buck above (1st) trend line price of $194ish. This may set up a short term bull / bearbattle next week and will be another sign and or signal on which way the next decisivemove will be. Either the trend linegives support and price bounces or consolidates around the $187 (4th)spot, which would set up a trade on the bullish flag formation to break throughthe $187 spot; or not get support from the trend line and continue to fall downthe large break up candle so the next spot of interest would be $178ish. That’s far enough to consider a short or PUTposition, you know your wrong at a weekly close above $187, which allow around2 bucks to go against you, but $180 is the next level of support I see, so 7bucks of possibilities.
Friday’s close was above the (1st)trend line and the candle stick is climbing the breakdown candle fromWednesday. There may be something left,but this trade was a Thursday closer trade so jumping on board now is too muchrisk if there is a Monday gap open. I’llwait to see if things look bullish on Monday to buy these short term calls.
The QQQ quarterly looks pretty ugly and it remains my SlurryPumping dump of the year selection that will more than likely lead all themarkets down.
1st spot of interest is the low area from thequarter before this. BTW keep in mindthat for all of these quarterly charts the last candle is not complete as itstill has most of the quarter to go. Isprice going to take a pause and hold the $260 level. From the indecisive candle from the last quarter,it could be signaling a trend change from it being “about time for this”. From top to bottom it takes 5 candles to getthere which gives me the yeah, it’s time for a change. It doesn’t mean it bounces up, but maybedoesn’t keep going down.
2nd price level of $321 is right around where Iwould start thinking that my overall thesis of dropping like a stone is not theright choice.
3rd spot ($300 ish) is where I think the latestrun could go before turning back downward.
4th is the range of where I see the bottom whichis roughly 50% from where the price is at now. Yeah, I’m saying the QQQs could be as low as $150 after a few more quarters.
After the QQQ Monthly chart ran down to (1st) $255ish,it has set up a range to (2nd) $300ish and has been trapped within thisrange now for a while making an overall bear flag pattern. You can see that $190 – 150 level of supportcome more into focus for a nice location for support.
The QQQ Weekly chart is also showing that familiar wedgepattern with the trend line (1st) having been tested a few times before, and the lower level which iscloser in range (2nd) to the current price so something is going tohappen pretty soon on this chart that has been playing out for the last 12months. This should result in a larger move really soon either up or down. Currently (3rd) price closed onFriday at $282.68, and the trend line (1st) is hanging out at around$284.50ish. That’s close enough to setup a bull bear battle right at the spot of resistance next week so keep thosenumbers in mind.
The daily chart confirms the statements for theweekly charts, and no doubt the QQQ will be a leader on Monday barring someblack swan action going down in the next 12 hours.