SPY's Weekly Chart Issues a Warning
The central level for the week was recovered, the $S&P 500(.SPX)$ closed above $6,629.1, $NASDAQ 100(NDX)$ above $24,422.6, the $Dow Jones(.DJI)$ did the same overcoming $46,126.4, and the $Cboe Volatility Index(VIX)$ crashed -8.6% to our level 15.3.
Those moves sound bullish, and they are, Monday is very likely to bring green price action, in any case let’s zoom out to analyze the weekly chart for the $SPDR S&P 500 ETF Trust(SPY)$ :
The weekly candle set a cross, which as highlighted is a warning sign, during the last two years it has anticipated pullbacks or corrections to the market.
The red arrow indicates an immediate -9% correction at the beginning of 2023, the orange one that follows anticipated a -3% pullback, and the yellow one in March 2024 was an early sign of a -6% pullback. Similar cases follow for May 2024 with a mild -3% intra-week pullback (hence the orange instead of a red arrow), and the yellow one for the end of June 2024 anticipating a -6% decline.
What is the case today? An immediate correction like the red arrow indicates? an intra week pullback like the orange arrows present? or an early warning followed by two green weeks before a deeper pullback around -6%?
The weekly central level will help us to navigate the current conditions, we have studied before that choppy weeks are usually part of top formations.
When the rate of change has presented a divergence with price action, the warning signals have more relevance. The oscillator does not top with the price action like the RSI, this one provides a quiet condition that when unfolds a decline, it usually occurs quickly.
The central level for next week will help us navigating the price action, this is a simple approach based in a clear predictive model, and when the price loses the central level, the next support ones become the target from where the price have bounced lately. The bearish weekly target for the SPY was $655, and that was indeed the bounce zone, as it was for the $Invesco QQQ(QQQ)$ with $588 acting with extreme precision as support.
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