In my previous analysis I talked about bonds and how they are looking to continue its down trend for the short to medium term future. This chart of SPY currently validates that theory. On the
monthly and weekly it has broken out to the upside into a channel it hasnt been in since October of 2018. Prior to falling out of this channel it was bouncing around for about 6 months. and prior to that it was at an even higher channel(from September of 2016 until March of 2018). The channel im referring to is marked by the top thick white resistance line and the top thin grey support line.
the S&P has been having new ATH what seems like everyday. This isnt usually a good time to go long on something, however it isnt showing any signs of slowing down. If Q2 are positive then that increases the odds of the stock market continuing this crazy run which started march of last year.
A break below the channel it just broke out of(outlined by the gray thin ) wont necessarily be a bad thing in the near future, however, a break and close below the support of that channel (which is currently exactly at the 21 ) would be very and would increase the odds of us having that major correction many people are anticipating. This would then bring the thick bottom into play. A retest of this support by the end of the year would put us at about a $380 SPY which is currently what the 50 MA is.
We havent had a clean touch off of the 200 MA on the weekly since December of 2018. We did crash below it during the rona crash, and tested it as resistance before cleanly breaking out and it hasn’t looked back since. Soon it will be needing a retest of the 200MA which currently sits at about $308, and of course will be higher by the time it is tested. This may take a year or even more to actually happen.
If we close July in this current channel and start August with momentum(catalyst could be ), we can potentially see a $480 SPY by November of this year( this would test the top of the thick white resistance.
With bonds in a clear down trend and with many signs pointing toward a continuation of this trend combined with SPY’s upward trend, market sentiment, etc. The odds that this upward trend for SPY will continue in the short to medium term(6-12 months) is more likely than not. Which at that point it should be looking for a major correction possibly to the $340 levels which was a very strong resistance flipped support and also where i estimate the 200 MA to be a year from now. I think the major catalyst to look at is for Q2. Theres so much high expectations for this quarter it can easily be a disappointment to the markets. If the markets react negatively it could then invalidate my theory of a continuation of this trend for the next 6-12 months and make me change my stance to for the short to medium term future especially if we break down and close below $415-$420 in the next 3 months would also invalidate this theory. However if we match or beat expectations, odds are we continue this trend until we test the top of the upper channel(top thick white line) which is where i would become overly cautious if you arent already.
I do expect further continuation of this trend before reversing. This isnt investment advice, trade with caution and good luck !