SPY: Bullish, Bullish, Bullish .. MaybeHey guys,
Per ush, its been a hot second. To be fair, there hasn't been anything to update as we retain the bull market bias and an up bias, no point in saying up every week haha.
But now that things seem .. bearish, I think its time pop in and give a brief update.
Its not bearish. Projections are incredibly optimistic for next week. The caveat being that Monday is showing as particularly bearish. So probably a sell to kick off the week, but don’t expect parabolic demise. The projections on everything are incredibly bullish. That include: SPXL, SPX, SPY, QQQ, TQQQ, NDX, DJI, Bullish with no hint of bearishness from what I can see in the preliminary forecast. That kind of prospective conviction usually translates to some pretty convincing PA.
My biggest concern here is that we could theoretically consolidate and continue consolidating for some time. But with kind of everything index wise leaning to a solid bullish bias on the probability algorithms, I suspect we should actually see conviction one way or another this week.
Into Friday and over this weekend I was actually bearish biased for a 4% pullback. Now that the market has what it wants (50 bps cut) and all is good in the world of the market, I have noticed a decline in volatility. The PA is more similar now to 2021. And in 2021 and through most historic stable bull markets, pullbacks are about 4 to 5%,
However, obviously the fact that legit every model read bullish for next week made me take a second look, and I kind of understand now why the 4% pullback is not likely to happen:
Based on our recent breakout, a 4% pullback would require us to completely give up the breakout and break down from it. That would be an incredibly bearish thing, which the market isn’t going to allow, However, the bearish probability for Monday does suggest we could see a re-test of this breakout. As from where we closed on Friday, a retest is about 0.8%, If we somehow manage to gap down, it will be less.
We have a very bullish reference target as well as you can see in the chart above (the yellow line). That target is 572.50.
Remember, we have a very high prob target, with a miss rate of around 5%, at 585 on SPY for this 6 month period.
In October, I will do my October themed post because its my favourite time of year! Haha, and I will share the end of year, 3 month (quarterly) high prob target for SPY.
So in closing, SPY looking bullish for the week except on Monday. Retain bullish thesis overall but brace yourself for the chance that we continue consolidation.
If you are intending to swing SPY long going into next week, my suggestion is ETF. If you want to use options, go further out and try to go as ITM as possible, because if we do enter a period of continued consolidation, its going to destroy OTM, cheap options. The market has not been option friendly lately, especially with the VIX not falling and maintaining an elevated level, So you have to be sure to take this consideration seriously, otherwise you can be right and we go up but you still lose money.
On the topic of that 585 high prob target, the range cap on the week is … 585 haha.
That’s it guys, safe trades!
