SPY Update (monthly close)
We have managed to close out a month above the 50% retrace at 414.04 drawn from 2022 high to low. This has been a key area to overcome. We are clearly now above the 405.11 POC area, and this month we cleared another high volume point at the 50% retrace line (414.04).
The low points in September and October 2022 touched and repelled off the lower 2 sigma line of the regression trend (salmon color in the background) drawn from March 2020 COVID low to January 2022 high. From May 2022 to present we formed roughly an upper lateral wall at the 50% line, accompanied by a rising trend of higher lows. In effect, this has created an ascending triangle.
This from Stockcharts.com:
"The ascending triangle is a bullish formation that usually forms during an uptrend as a continuation pattern. There are instances when ascending triangles form as reversal patterns at the end of a downtrend, but they are typically continuation patterns. Regardless of where they form, ascending triangles are bullish patterns that indicate accumulation. Source: stockcharts.com"
The ascending triangle is a bullish reversal pattern, but in a downtrend is is less reliable as a bullish reversal than if it occurred in an uptrend. I personally have seen very few (maybe none) of this pattern in a downtrend, so I have no opinion of which way it will go if it breaks. Nevertheless, the higher lows exhibited in the trend is encouraging to bulls.
You will notice the twelve month Bollinger bands are narrowing, and the 12 month moving average is levelling out. A move may be nearing soon.
If we can further move past the 50% retrace line, we get into an area of declining volume (down sloping) and we could have a pretty fast move up to 424. On the other hand, should we have a negative catalyst, and if we descend below the 405 POC area we could have a sharp descent lower on a declining volume slope. (I can think of two possible catalysts -- continued overly hawkish FED or further bank solvency issues).
So I think next week FOMC + further banking issues may give us some good clues.
The low points in September and October 2022 touched and repelled off the lower 2 sigma line of the regression trend (salmon color in the background) drawn from March 2020 COVID low to January 2022 high. From May 2022 to present we formed roughly an upper lateral wall at the 50% line, accompanied by a rising trend of higher lows. In effect, this has created an ascending triangle.
This from Stockcharts.com:
"The ascending triangle is a bullish formation that usually forms during an uptrend as a continuation pattern. There are instances when ascending triangles form as reversal patterns at the end of a downtrend, but they are typically continuation patterns. Regardless of where they form, ascending triangles are bullish patterns that indicate accumulation. Source: stockcharts.com"
The ascending triangle is a bullish reversal pattern, but in a downtrend is is less reliable as a bullish reversal than if it occurred in an uptrend. I personally have seen very few (maybe none) of this pattern in a downtrend, so I have no opinion of which way it will go if it breaks. Nevertheless, the higher lows exhibited in the trend is encouraging to bulls.
You will notice the twelve month Bollinger bands are narrowing, and the 12 month moving average is levelling out. A move may be nearing soon.
If we can further move past the 50% retrace line, we get into an area of declining volume (down sloping) and we could have a pretty fast move up to 424. On the other hand, should we have a negative catalyst, and if we descend below the 405 POC area we could have a sharp descent lower on a declining volume slope. (I can think of two possible catalysts -- continued overly hawkish FED or further bank solvency issues).
So I think next week FOMC + further banking issues may give us some good clues.
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