Sell the news at 294?
Updated
In our previous post, we had mentioned how our long target was the 270-294 range. 280 being the primary target. That has now been broken impulsively due to an overnight pump on news about remdesivir working on covid. If that drug rings a bell.....that would be because Wuhan announced the same thing a MONTH ago.
Nonetheless, news is news, just like the way down, when bad news gets bought, it's time to prepare for a strong bounce. When good news gets sold...it's time to get prepared for a strong sell.
We're yet to see the good news get sold.
294 on the SPY could very well still happen here. A FOMO pop at the open, and fade from there.
Resistance at 294 area: 200dma, 100dma, .618 fib, long-term pivot
Overall, the longer the market stays propped up, it just makes that yellow trendline further and further away....The yellow trendline that I think still must be retested at some point, and it has not been yet
So again, some potential downside scenarios:
207 looks to be the primary target here. A break below previous lows, that would essentially be a "false" break that finds resistance on the megaphone pattern and yellow downward trendline. A second bounce then occurs, likely a slower grind higher as people start to watch what unfolds from an economic standpoint.
This giant pop, and the VIX still sits compressed around 40:
Pretty clean pattern, with a break here. Implying a pop in day(s).
Again, technicals are great, But being able to combine them with human behavior can be the big secret. How many retail traders are itching to get into the market right now after last nights news? (I.E morning pop). How long does it take for people to realize that it doesn't matter. Governors open up the states, not Trump. Drug testing is still going through trials...millions of people are pressed up against the wall right now. Their spending behavior will NOT go back to normal for the foreseeable future. Until there is a cure, people will still spend cautiously in event there is a second wave. How many people have thought through end of year affects? TV shows you watch in the fall/winter are being suspended/cancelled. Why? Because they are supposed to be filming them right now. It's pretty hard to make money off ad revenue for the new episode of xyz, when it's not airing.
How long does it take for this to settle in though? How long until fluffy right now good news, gets sold for the long term outlook? That's what we are waiting for.
294 will be a golden short opportunity here. Watch for the fade into the close. Watch for tech to lag the spy.
Nonetheless, news is news, just like the way down, when bad news gets bought, it's time to prepare for a strong bounce. When good news gets sold...it's time to get prepared for a strong sell.
We're yet to see the good news get sold.
294 on the SPY could very well still happen here. A FOMO pop at the open, and fade from there.
Resistance at 294 area: 200dma, 100dma, .618 fib, long-term pivot
Overall, the longer the market stays propped up, it just makes that yellow trendline further and further away....The yellow trendline that I think still must be retested at some point, and it has not been yet
So again, some potential downside scenarios:
207 looks to be the primary target here. A break below previous lows, that would essentially be a "false" break that finds resistance on the megaphone pattern and yellow downward trendline. A second bounce then occurs, likely a slower grind higher as people start to watch what unfolds from an economic standpoint.
This giant pop, and the VIX still sits compressed around 40:
Pretty clean pattern, with a break here. Implying a pop in day(s).
Again, technicals are great, But being able to combine them with human behavior can be the big secret. How many retail traders are itching to get into the market right now after last nights news? (I.E morning pop). How long does it take for people to realize that it doesn't matter. Governors open up the states, not Trump. Drug testing is still going through trials...millions of people are pressed up against the wall right now. Their spending behavior will NOT go back to normal for the foreseeable future. Until there is a cure, people will still spend cautiously in event there is a second wave. How many people have thought through end of year affects? TV shows you watch in the fall/winter are being suspended/cancelled. Why? Because they are supposed to be filming them right now. It's pretty hard to make money off ad revenue for the new episode of xyz, when it's not airing.
How long does it take for this to settle in though? How long until fluffy right now good news, gets sold for the long term outlook? That's what we are waiting for.
294 will be a golden short opportunity here. Watch for the fade into the close. Watch for tech to lag the spy.
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VIX Update:Futures Update:
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9 dma is the only thing really in the way before a further sell-off if the wedge breaks.
Personally, I think the market desperately needs a big beat on earnings out of Netflix today. Why? Because everyone has been pouring into the stock (much like amzn) as if they are bullet proof. What happens to sentiment if that proves untrue? "Everyone is at home....everyone must be buying and watching Netflix". Or are they? How many people are cutting that subscription because they are tight on money, and they don't need Netflix that badly?
Being that Netflix is a monthly subscription, and this pandemic didn't get "financially serious" until a couple weeks before the quarter ended. The real affects likely wont be seen until Q2.
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Low volume day....Note
Important to note....wedge breaks are your warning sign....it doesn't necessarily mean the next day or the day after...the market is going to have a strong sell-off....Wedge retests occur.....They can even be regained temporarily, much like we seen earlier this year:But when that fall ultimately occurs, is unpredictable. Patience, 294 could still happen fairly easily with the trend break staying in tact.
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294 test would fall on the same day as Apple earnings....Note
and a fed meeting..Note
Lower highs on money flow...demand....on new SPY highs...If there is one thing throwing a twist into this 294 sell-off....it's the VIX:
It remains broken out of it's downtrend, but a test never happened....a test does not have to happen (as seen in the prior spike), but a test with great fed news and FAANG news today and tomorrow, could create a vix crash that retests the trendline and the gap at 20. Potentially, one grand finale blow-off top
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309 test of the megaphone pattern would then be the next target:There is a ton of resistance sitting at 294, economic conditions are terrible. It still sets up for the perfect storm to reverse right there. If there is one thing we have learned over the past two years though, is that the fed....the president...they know it too.
Don't be at all surprised if the market closes around 294...or rejects it, then some "bullish" news comes out in after hours, and the market gaps right above it. Gilead's drug update on Covid didn't come out the same exact time bad GDP numbers did by accident....
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All within 1-2 points of eachother:200 dma
61.8 retrace
trendline break resistance
March 2019 highs
2018 highs
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VIX = redNote
SPX = Red ***Note
What happens when the most Covid proof stock proves to not be so Covid proof? (AMZN)
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