S&P 500 Market Update + Trade Idea and process AMEX:SPY
S&P 500 Review
I would like to start off by saying my previous post from October 24 outlined this correction almost to the exact T. From $585 to 565. That is a 20 point move. I say this not in arrogance or self conceit but to provide context.
Combining Corrective waves
Zig zag / irregular flat/ zig zag (missing)
I believe we are still in a corrective phase in the market. For Ew followers I believe this would be called an irregular correction. it is a complex correction. I recently learned of this pattern from other great ew traders.
Starting with a zig zag correction
( A B C) \/\ down up down - picture a ball bouncing from a higher structure and gradually bouncing lower. Then it rotates into second structure this one similar to the first but more momentous down up down. If I am not mistaken we are near ending the second leg ⬆️ up. that means we should be rotating ⬇️ down next.
If I had to provide a Price target for the full last leg I would say back to 565 or lower.
Now this could be completely invalidated there has been so much volatile price swings, however the more you know the better you can prepare.
(Now the fun part)
One thing I find difficult about trading is all the information out there.
So many theories and data but yet it has no benefit to me if I cannot make a decision.
As a new trader I would say a great chunk of the information out there does not lead to decision making.
Trade framework💡
Let’s walk through a trade plan from start to finish. Assuming everything is correct where price goes in the short term is irrelevant. If it goes to $700 in a day doesn’t matter.
A) I would be looking for reversals.
1. Using candle stick patterns ie. bearish Engulfing or evening star patterns.
2. triangle patterns ie rising wedge.
3. Double Top (huge reversal at a set level) entry on second reversal / entry on third confirmation candle. Stop loss slightly above first candle level.
4 Head and shoulders pattern That is it!
B) I am targeting the areas of resistance.
Questions to ask yourself.
1. What are some areas price gapped up from but never revisited. (Mark out the gaps). Trading into those zones.
2. What were some major resistance level before and has it been retested as support? Mark out strongest levels.
3. Where would buyers lose confidence. This is contrarian trading. Trading against the popular view. If I was a buyer & price reversed on me where would I sell? These are the area you should be looking for major moves your area of opportunity. (Tight stop loss).
Stop loss should be tight.
Re-entry is ok.
Suffer 1000 tiny cuts vs a guillotine.
1. If price breaks above 600 & then fails I would be looking to open a short position targeting the 586 level. Multiple positions ie. open 4 positions
Sell one before $593. 2 at 586. Hold unto final position - to see if price falls further. Sell for profit if prices bounces hard. Look for re-entry.
#spy #500 #index
Will create a video to go over my chart.
NFA! Do what’s best for you.
