SPY: Week of April 7Hey everyone,
Sharing the levels for next week.
I don't have much of a forecast tbh, the thing is, in bullish markets its harder to forecast the long term, easier to forecast the short term.
In bearish markets its easier to forecast the long term, harder to forecast the short term.
Each week we have been up and down, taking out all highs and lows for the past few weeks owning to the volatility, and that is what makes it difficult to really adopt any forecast when most times we are just hitting all targets with the volatility.
Here are some things for the short term:
About 78% chance spy Retraces 528
507 is the reference target
Based on the EMA 21, there is an 89% chance of seeing a bounce on SPY.
Based on the EMA 50, there is a 69% chance.
POC from last week is at 537.
Will it bounce?
Yes, I mean like I said, we take both highs and lows out each week, I don't really foresee this week to be any different, haha.
And the longer term?
So the real interesting stuff I guess is the longer term, but not that interesting.
SPY is rapidly mean reverting. Right now the mean for SPY is around 481. This is actually within the forecasted levels for next week, so that's curious.
In 2022, the mean was 350. It took exactly 10 months (from January to October) before we finally hit it (and went 2 points lower).
At this pace, we are hitting it this month. Which is a concern. Why? Well let me tell you.
There are corrections that are required to happen generally, just a general mean reversion, not necessarily fundamentally driven. That was the example of 2022.
Then, there are corrections/crashes and cycles that are fundamentally driven. An example of this, for SPY, would be 2008.
In the fundamentally driven crashes, for SPy those would be COVID, 2008 Financial Crisis, those surpassed means and let to a stark sell. COVID was pretty quick, but 2008 was really drawn out owning to the unfolding of economic events.
The reason the 2 require distinction, is because technical and analysis are useless during fundamental corrections. You could draw fibs to the cows come up in 2008 and you would be bankrupt by month 3.
However, in 2022, technicals and such worked fine because we were just doing a basic correction from getting too far from the mean.
Interestingly enough, my comparison algorithm that compares the current year to similar years, for both SPY and SPX, has indicated that 2008 is the most similar year as of right now. This is a huge change from the results it gave even just a month ago.
For fundamental sells, it doesn't stop until stuff gets resolved. As was the case in 2008 with the required bailouts, and once the dust settled from the multiple industries and businesses that went under. Then the market started a slow and painful recovery.
The situation here is more similar to 2008 than the COVID crash. The reason being the main concern with COVID was economic shut down as a result of the pandemic. However, this was quickly curbed with modification of the work routine (industries working from home where applicable), the continuation of industries functioning and the huge stimulus that the government injected into the economy.
Right now, the issue is a global trade war. In 2018, Trump only tariffed random items (mostly metals) on a few random countries. Right now, he is blanket tariffing the global economy. He doesn't even stop there and has to bring in my favourite animal, the Peunguins.
God, Trump, what did they ever do to you? Leave the penguins alone!
This is incredibly bad, its actually unprecedented. It is essentially a world war from an economic standpoint. And we are still waiting for the verdict on some bigger nations retaliatory tariff results.
The global tariff war extends beyond just increase the cost of things, it actually may lead to a decrease in the US money supply, a rise in inflation and a huge cut to GDP for the US and other countries impacted.
Trump could lift them, ease them or something. This would probably lead to some initial reaction to the market, but it seems the market doesn't even trust him anymore because when he kept playing those "just kidding" games into the beginning of the year, the market just stopped reacting to them. It is kind of funny.
So the result is, it could be much worse than most anticipate, even myself.
As of right now, my plan is to go long in the 480s, kind of on most things. Rebuild a portfolio.
But as we progress, it seems that 480 may not indeed be the end. It just depends on Trump's mood at the time I suppose.
From a purely math analysis:
481 is the mean for spy, we are following the annual bear market path which has as low as 468.
Here is where we stand now on the annual assessment:
And then in terms of mean reversion, SPX is the most interesting to take a look at:
4,791 is the mean. The last mean correction it has had was in 2022, same as spy:
In addition, SPX just signaled a top/mean reversion signal.
On the prospects of a bottom formation:
None of my stuff indicates a bottom formation. In fact, we have some top signals just newly triggering, which is nuts I know but the reality.
So that's .. good? Maybe, haha.
Anyway, those are my thoughts.
My suggestion is to continue to position defensively in anticipation of both up and downside next week.
Safe trades!
Also, for more deep diving into the fundamentals, sort of, consider reading this post from me if you haven't already:
