$SPY - Huge V-Shaped Rally, New All Time Highs - Now What?

6 нояб. 2014 г.

This chart shows SPY, the major ETF proxy for the S&P500 index, on a Daily timeframe.

Plotted on the chart are our SCMR Trends™, which sequences price to find the correct behavior, and SCMR Dynamic Levels™, which dynamically plot support / resistance zones. Both are available in the TradingView App store.

Following a confirmed reversal on Oct 20th (see "O" under price there), the market has continued the trend of the past 15 months by rallying in a straight line to new highs. Although the reversal was easy to spot, the relentless run now creates a (familiar) problem: Do you chase up here?

My take is that the market is more likely to go rangebound after such a strong advice but I do not yet see evidence of a new material decline on the horizon. How to plan for the next steps?

For short term traders, 2 days - 1 week horizon:

1.) Two former Dynamic Supply™ areas and one recent demand area are plotting under price in a range of $196 - 199, so I strongly expect some demand there on a dip. This is a good entry because of what I consider the adverse scenario. Choppy market. This should be near a range low, at least on the first try of the level.

2.) According to SCMR Trends™, price is currently painted green, so if it wasn't obvious already, the price is in a strong uptrend. Strong uptrends rarely roll over and die, usually you get at least one chance to buy a dip.

RISKS:

1.) A new material bad news event can change risk appetite, so the dip or range may be smaller than expected.
4.) Not a recommendation to buy or sell, just an example of how to use the indicators to tackle a common problem in today's market where everything is a V-shaped rally to new highs.

Other Notes:

1.) Both Sector (Industrials) and Sub-sector have been very bullish, so the market of stocks as they say is generally healthy up here
2.) Large Caps as an asset style and Nasdaq have been outperforming.
3.) The most bearish scenario I can think of is this new high is a trap, then we reverse into a range. Given that Nasdaq is way above the highs, it lends to support to a dip buy rather than a breakdown (as in, SPY in the range will coincide with QQQ ranging above old highs which is still bullish)