SPY is touching the most significant level, acting as a strong upside resistance 431, as we can see on the monthly chart. This is a confluence of upside resistance and 450 downside support. A break above this level exposes the median line of Andrew’s Pitchfork channel 450.
The Weekly SPY chart shows price action reaching 61.8% of the Fibonacci retracement of the huge downside swing of what we see as a 2nd wave of the possible downside 5. The lack of a significant break above 431 would indicate that the second wave of the downside five is almost finished. Only a confirmed break above 431 and 450 will invalidate the medium-term downside reversal, and a break below 425 followed by a confirmed break below 406 is required for a high-probability short trade in the coming week.
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As the famous trader says…
“I know where I’m getting out before I get in.”Â
Bruce Kovner
How to trade this?
Obviously, for Q2 2023, we have this upside resistance of 431 which should be broken higher for an upside continuation. This means that now short trade entries have some advantage over long trade entries as this recent move higher could be overextended. It would be best if you opened a short trade here first. The risk to reward on this trade is higher than 1 and the timing of the trade could be on Monday NY session upon a break below 425 to target 400 first and if broken to target 380.
