Is the Market Due for a Correction?
The SPY has been trading in an upward parallel channel since November - briefly dipping below during the selloff last week before sharply recovering.
I believe the market is due for a more extended correction for several reasons:
- The MACD and RSI are both displaying negative divergences, which is a bearish signal.
- Furthermore, the On-Balance Volume (OBV) is trending down. This indicates that smart money (aka institutional money) is flowing out of the market, possibly because they are anticipating a market-wide correction.
- The SPY could continue trading to the top of its channel, which coincides with the upper Bollinger band and the 0.618 Fibonacci trend extension. Each of these indicators can act as resistance as the price approaches from below.
I will likely take some profit and/or hedge agaisnt downside risk with UVXY calls before the end of the week.
Good luck trading.
I believe the market is due for a more extended correction for several reasons:
- The MACD and RSI are both displaying negative divergences, which is a bearish signal.
- Furthermore, the On-Balance Volume (OBV) is trending down. This indicates that smart money (aka institutional money) is flowing out of the market, possibly because they are anticipating a market-wide correction.
- The SPY could continue trading to the top of its channel, which coincides with the upper Bollinger band and the 0.618 Fibonacci trend extension. Each of these indicators can act as resistance as the price approaches from below.
I will likely take some profit and/or hedge agaisnt downside risk with UVXY calls before the end of the week.
Good luck trading.
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