Closing longs from last week at 4630
We've now broken the 161 and rallied back to the 127. These can be precursors to the 161 breakout trade.
We have confluence with this matching up with the 76 fib of the recent swing down. These can be common places for bear market rallies to end.
Looking on the smaller charts there's the possible formation of the full bear market rally pattern.
Understanding the bear market rally Part 2 : BeatTheBear (reddit.com)
I think we'll probably see SPX range around the current price for a while but if we see a clear break lower that will be a move we can use basic break/retest rules to short for continuation trades.
Now that we've had a 162 break we can extend the fibs for a bigger swing to get the next 161 support/break level. When we do this we can see the recent rally comes off the 127. Seeing reactions from previous fibs can help to pend weight to the possibility future fibs will be useful/decision points. This would put our next big short target 4550 for near term trades.
The next 161 level has the potential for a strong rally off of it. Even if the market is overall going lower this is a level a big bull trap could come from. I think there's a high likelihood I'll be looking for buying opportunities if we drop into that area. If the 161 makes a clean break we could be into a stronger downtrend. Below are estimates of what each move would look like.
If the bulls are able to make a break of the recent highs I think it's then much more likely we'll see SPX up to 4680 or so before it's worth trying the short again. If we break over 4650 the best trade will probably be to buy into the next dip and bet the sequence of higher highs/higher lows will continue (So stop losses go under last lows).
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