Hello,
SPY was down .88% and closed today at $426.43, we did Break out of that range between SPY 430 and 437 and I told you this was going to be a very simple market to trade as long as you had a very well defined plan prepared for either scenario and I still think that this is the case. The number one thing to pay attention to right now, although I do think that we will get a strong bounce at some point but for right now, Right now in the short term, if you are a short term trader and you do not like to swing trade over longer periods of time as I usually do but I do believe this is a short term trading market environment currently remain risk off with SPY below 430. Now if you are a longer-term swing trader, you should stay long above the rising 200 daily moving average. Or even more simple than that, just stay long above SPY 420 because if we break below SPY 420, we are likely getting another lower high within a bear trend and we are going to much lower prices. So in my opinion it is as simple as picking aside if you are bearish you can stay short as long as SPY is closing below 437 and if you are bullish, You can stay long as long as SPY is above 420. The bears are winning right now because we did break down below the range at 430 and below the range, we have to respect the fact that price action is below all of the moving averages, which favors a bear trend. And then the confirmation of the bear trend will be the break of the rising 200 daily moving average and the loss of this critical support at 420. Also pay attention, we did get high volume selling today, which is no surprise because a lot of people likely got risk off below 430 and I do believe that’s completely normal. I would have actually been more surprised if we had low volume on the break below 430. So from here it is going to be the difference between whether or not this is a lower high right around SPY 437 and we’re going into a bear trend, Or if the market is actually just pulling back to try to put in a higher low before we continue a bull trend and break out of this downtrend from this correction. So there is still a very good chance this correction was a correction within a bull market. However, that is not going to be the case if SPY breaks down below 420. So we’re going to know very, very soon. And if you’re a short term trader just remember this is risk off below Spy 430 and we did get that confirmation today with the close. The only way I would get back to being risk on from here if you’re a short term trader is if SPY immediately starts to bounce and closes back above 430 then This was likely just a pullback. And a quick liquidity grab below support before we go higher. So just to summarize, if you’re long term bullish, you’re bullish above 420 and the rising 200 daily moving average and if you’re a long term bearish, you’re staying short until we can close above by 437. Anything in between and short-term trading is risk off below 430 because there is a good chance we are going lower below 430. And if you’re only a short-term trader, you do not want to get caught in a falling knife scenario. With high volume selling it’s always possible that’s the scenario we find ourselves in, we just need more confirmation with tomorrow’s price action.
On the NASDAQ 100 Triple Q’s, we were down .94% today in the triple Q’s and the QQQ also closed down below all the moving averages. I did tell you if the Q’s could not hold this critical support zone right around 360 to 362, it was going to look risk off. So we are now in that territory of risk off below SPY 430 and very close to risk off in the triple Q’s below 360. So as I said in the SPY’s analysis, if the bulls do not start bouncing immediately out of this hole, It is going to look bearish and in the triple Q’s the confirmation of a bear trend will be the breakdown below 355 and then this will look like a lower high rejection from the down trending resistance trend line when we rejected on October 12th from that resistance level right around 373. So it is possible these are lower highs and lower lows developing, but we have no confirmation it’s a lower low until we lose the critical support down at 355. Below 355 we would go to 347 and then 337 and the bulls need to break back over 362 and try to get another higher high breakout above that resistance which is going to be between 370 and 373.
Stay Nimble, be ready to move at all times. Let the Price action do all the talking and it’s all gonna work out fine!
Cheers,
G. Allan Collins
