SPY to $380?
Yesterday I examined how and why a bounce from here might happen. Today’s follow-through helps. It’s not lighting the world on fire. And the action was very choppy while we wait on the Fed tomorrow. But it's still positive.
We can never know if bottoms or tops are in until well after the fact. But we do know that for now at least, this is a bounce in a downtrend. So what’s next if the bounce can’t hold up?
Let’s take a look at $SPY $380. It could happen. Some might even say it looks likely.
There’s no disputing that the ‘path of lease resistance’ is lower. The bears are in control and have been since January, if not before. The top is in. We’re trending lower. And the economic, fundamental, and geo-political factors all point lower.
So why $380?
It coincides with the Covid low anchored VWAP
It’s at the 38.2% Fibonacci retracement of the bull move. We’ve already seen these levels in $QQQ and $IWM. They are trading there now.
And it would make a nice round -20% selloff and achieve the “official” definition of a bear market.
That last factor doesn’t really matter. There are much better measures of market status than arbitrary percentages. But the financial media will have a heyday with it.
(Bear with me here, this is a weekly chart and it’s only Tuesday. Don’t call the Chart Police on me.)
So if this bounce fades and we start heading lower, this is the level I’ll be watching closely.
For now, I’ll leave with two thoughts:
There’s no way $SPY doesn’t move lower to $380
In trading and investing you can never say, “There’s no way.”