SPY: Last week of March ish Oh yeah, posting early because I had coffee this evening and am wired.
Happy Friday! Hope you all had a safe and profitable trading week, if not, don't sweat it, the PA was pretty bad and pretty challenging for most. The worst part is the current PA requires a lot of patience. If you're a scalper, probably not so bad but I personally find there are a lot more scalp traps lately than usual, so I do advise against scalps.
Doing another written post, just because I find I can organize my analysis and thoughts better and be more in-depth without wasting too much of your time. So let's start off with the summary for next week, adding some new variables that my stuff tracks but I generally don't share, but I should share because it may be helpful for you.
Summary
Here is the snapshot for SPY for next week:
Best fit high target 567.96 with a probability of 29% (shown on the chart in white)
Best fit low target is 553.95 with a probability of 73% (shown on the chart in white)
Expected return on the week is -0.6%
Expected High ATR Range from RSI is 3.20 (open to high)
Expected Low ATR Range from RSI is -4.05 (open to low)
Expected High ATR Range from MFI is 5.18 (open to high)
Expected Low ATR Range from MFI is -3.01 (open to low)
Expected High ATR Range from Stochastic is 3.38 (open to high)
Expected Low ATR Range from Stochastic is -6.7 (open to low)
SPY Remains below the EMA 200 on the day, having had multiple rejections, and multiple attempts at reclaiming but always failing to hold.
We still have our outstanding 5% pullback from the cross below the EMA 200. The TP is approximately 533 ish.
Overall, based on the summary, the outlook is bearish. 🐻
Volume Data
Volume profile has shifted from a sea of selling to a lot of buying over the last 5 days.
POC for the last 5 days (1 trading week) is now up to 564, so this will be an area to watch for consolidation and generally not an area to take a trade. This is a very important thing to keep in mind, you don't want to do anything if SPY is at 564 as this is consolidation zone based on volume!!!!
Volume remains overall low. If we look at the last 25 trading days, we can see that sellers are very much there, it is likely that we have just dropped in volume this past week. Take a look at the 25 day (1 trading month) volume profile:
If you read the description in the volume profile chart, you will understand the predicament, and also understand kind of, where the rangeyness and whipsaw come from. There is still a lot of panic in the market, a lot of fear, people are trapped and looking for exits. This translates to stark rejections of certain levels where bulls and bears are trapped. Leading into this week we only had trapped bulls, now we have trapped bulls and bears, so we are between a rock and a hard place in terms of making progress in a direction without seeing a lot of covering leading to some more volatility and whipsaw.
Overall, the volume metrics are positive and I would rank them as bullish. 🐂
EMA Data
We crossed below the EMA 200 on March 10th and closed below on the day. This historically leads to 5% pullback on average across both SPX, ES1! and SPY.
The pullback of 5% is calculated from the close of the day, which was around 557. So, 557 - 5% is about 529 ish (I am rounding, the TP is more around 531 - 533).
Currently we are holding the EMA 300 as support.
We have had over 3 failed reclaims of the EMA 200.
Overall, the EMA statistics are bearish 🐻.
Time Series
I haven't talked about time series in a hot minute. Like years acutually. So those of you who are long time followers, hi, how are you?! You will remember the sacred time series that carried us through the 2022 decline.
As of right now, I am leaning heavily to the quadratic time series model. Leaning towards a quadratic model assumes bear market correction. This could be or couldn't be. We won't know for sure until the market makes a new ATH. However, it was my guiding light in 2022 and it is current guiding light right now.
So let's just go over SPY's quadratic time mean, range and forecast very quickly.
SPY's qudratic time series model can be expressed as y = trading days(-3.902e-02) + trading days squared(1.062e-05) + 1.109e+02
Sigma or residual error range is 39.32
Taking this into consideration, SPY's current quadratic range is between 529 and 451.
451 is the LCL or lower confidence level.
The LCL is where SPY found a bottom in 2022.
Historically in bear markets, only 1 bear market has exceeded the LCL, and that was in 2008, where it exceeded by around 5 points.
Overall, the time series statistics are bearish 🐻.
Quick side note, if you followed me during 2022 and you have a photographic memory, you will notice our sigma (error range) is the exact same as currently, +/- 39. Kind of cool because it tells us SPY is really not doing anything it hasn't done before.
Forecast for Next Week
Forecast using only this past week data
Forecast using the entire downtrend period and this consolidation period
Data input:
Forecast result over the next 150 hours:
Overall, the forecast is bearish 🐻.
Verdict
We have what? Four bears, 🐻 🐻 🐻 🐻 for 1 bull 🐂. To summarize
Volume: Bullish
Overall stats: Bearish
Time series: Bearish
Forecast: Bearish
EMA Bearish
My expectation is up towards 570 into Monday, before seeing a rejection and consolidation again.
Currently, the EMA 200 is at 568, 570 would require another break of the ema 200 and fail.
The bearish thesis would be tentatively invalidated if we were to break and hold above the EMA 200. In this case, we would be looking for a further bounce of around 5% more upside.
Those are my thoughts, not advice of course.
As always, safe trades! 🚀
Side note:
We are all sick and tired of SPY.
Leave a comment with a request for something more interesting and I will try to get around to it this weekend! Maybe TSLA or something different.
