SPY In Correction Mode After Monday SL
Retest of the Monday SL Highly Probable
Monday morning saw a full gap down reversal that over the next two days got continuation with two higher highs and two higher lows. Yesterday, SPY found resistance at the low $393’s after a gap up. This resistance would hold sending SPY into the gap for a partial fill.
It seems far more likelier to me this a pause in larger-scale move down and, in fact, /ES futures have dropped over 80 points overnight sending SPY back into the lower half of Monday’s body.
While this area may be tempting for new long positions the more favorable plays would be shorting from resistance as any move up will be quite volatile and lacking energy. At least, based on what we’ve seen so far.
The SPY hourly shows possible support in the $378 area with $372 just below that. The advantage goes to shorts as these drops have carried more momentum than the rides and the RR profile gives them a more favorable setup.
Technically the larger-scale uptrend remains intact until SPY breaks below $374.77, the Dec 22 SL.
This entire move off the Oct 13 SL looks far more corrective than impulsive; impulsive being something like we saw throughout January. We’ve already retraced 50% of the 10/13-02/02 move with more to come. Does this mean we’re on our way to a new 52-week low? It seems likely. There’s a saying, I unfortunately forget the origination: “Don’t tell me where. Tell me when.” That, I do not know.
It’s such a shitty time for swing trades.
Day traders will want to see how SPY manages this gap down. While it’s possible we get some continuation downside today it may present an opportunity for small long positions if SPY can show a reversal. On the other hand, if SPY can get some type of bounce it could give a nice entry for day shorts. I know this probably sounds ridiculous as hell but such is the market we’ve been given.