Wedge At 52-Week Highs

SPY breaks trendline resistance going into CPI.

SPY closed near resistance yesterday on low volume ahead of CPI. Going back to June 15 this is the fifth close above $440. Only once did we see the next day close higher which, of course, was rejected. If you’re short-biased, this is your area.

CPI is the big talk coming into this morning but from a trader’s perspective I don’t think it means much. Given a price chart you’d be hard-pressed to find a CPI release that corresponded to some confirmation or rejection of the current trend.

The last such print came in Dec last year where SPY would drop 8% in seven days. The one prior (Nov 2013) saw a full gap up (+3.22%) with continuation to close the day up 5.50%. The release prior would mark the SL for the 2022 downtrend where that day printed 4.80% gains.

In other words, if you’re expecting a big move off this release, or a trend change, why?

The hourly above shows SPY attempted a move below my quinary trendline on Monday but got no follow through though the failure to immediately recapture the TL did have me open a couple of short positions. Still, SPY has printed mixed candles to get back over TL and it remains a continuation of slop in both directions; neither side really having the momentum.

Generally speaking when we get into consolidation pieces such as this the breakout comes about 3/4 of the way through. TL resistance above and the quinary trendline below identify this piece and we’re definitely nearing the end. So I do expect some trend to begin here soon.

I’ve been writing recently I would like to see a move down to the low $430’s and that remains so. Of course, the market doesn’t care what I want and if we rally from here I’ll take it. Until I see a breakout with volume behind it I’m keeping positioning on the small side.

Yesterday we saw a full gap up that held for all of 10 minutes. The 9:45 bar alone closed that. But despite the large red candle we saw no follow-through and SPY would rebound with mixed candles to retest the 9:45 high (HOD at the time). We’d get continuation to the upside into resistance at the Jun 30 open which has been the site of several inflection points.

It’d hold again in the late afternoon but briefly as SPY broke out in the final 30 minutes with follow-through. That breakout also pushed it over a descending trendline off the 52-week high. That TL was tagged several times in the beginning but this is the first tag since Jul 5.

I think longs will want to see that TL now confirm as support meaning we may get a break back below $441.50 but look for SPY to establish some type of reversal before moving back over $442.

That same area will be where shorts will want to open new positions (if they didn’t yesterday) and the first step will be to get SPY back under $440. This pivotal area goes back to the Jul 6 FGD where shorts had the ball but fumbled.