S&P 500 (SPY) Setting Up For Bigger Upside Move?

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July 5, 2018 6:00am NYSE:SPY

From Chris Vermeulen: As we continue through the July 4th trading week, it is time to look at the current market setup for signs of future strength or weakness.


Yes, there is a lot of outside economic and geopolitical factors at play right now that could cause some major market moves, yet we continue to believe the US equities markets are setting up for another upside move after retesting support and shaking out some trades.

Recently, there has been quite a bit of chatter about foreign and US debt levels as well as credit cycle events that many industry leaders are concerned with.  Overall, yes, we have to be cautious of a pricing level revaluation as a result of the credit cycles that are changing.

As the US Fed increases rates, this puts pressures on a vast array of credit market events that may cause some pricing concerns and economic concerns as foreclosures and repossessions tick higher.  Yet, we believe the valuations within the stock market are currently based on a companies level of operations and ability to generate returns.  Therefore, we believe the Q2 earning season, which is about to befall us, should be a very clear indication at to how well or poorly the US stock market is fairing in regards to fair pricing.

This first chart, the ES 240-minute chart, clearly shows the WEDGE price pattern that we are following.  By our estimates, this pattern is nearly complete (showing the completed 5 wave setup) and this pattern should likely prompt a moderately strong upside price breakout before the end of this trading week.  Of course, the July 4th holiday will interrupt trading for a bit, but we believe the 2700 bottom/support levels are already in place and as long at that support level holds, the upside is the only outcome for this wedge formation.

This second chart is the ES Daily chart showing the same WEDGE formation over a longer span of time.  Notice the clear support channels and the resistance channel that has contained price over the past 20+ days.  This has been the nexus of the price decline and the root issue of much concern regarding downside price capabilities.

The one thing that may people fail to understand is that the historical price peaks and troughs are still indicative of Upside Price Channeling with higher troughs and higher peaks overall.  We believe the 2700 level will hold as support and the ES chart will begin an upside price swing that could likely result in a rally to 2800+ quickly.

To add a bit of a kicker to this analysis report, this, our custom Tesla Price Vibrational Cycles analysis is showing us that the 2.25% vibrational cycle is nearly complete and that price is holding above the green support zone as well as holding above the blue price support channel.  These Tesla Price Cycles operate as price boundaries and breakout zones.  When price nears one of these levels, depending on the previous price direction and activity, we should expect a potential price reversal or breakout pattern – depending on the setup.

Right now, the setup is “strong support with rotational price channeling showing an upside potential”.  This Tesla price cycle indicates that “as long as support holds, we should expect to see an upside breakout/trend with a potential for a move to $277.50 or $280+ as the final outcome.

This holiday week would be a perfect time to catch the markets by surprise with a big rally.  Although it may not happen, we believe there is a strong potential for a surprise breakout rally soon and we believe these support levels are proving strong enough to prompt further upside price rallies.  Even though many skills analysts are concerned about the credit cycles and global debt levels, we know the game can continue much longer than many people think it is possible to continue.  As the old saying goes, “don’t ever get married to a position”.  We are positioned for success if our analysis is correct and we will take small losses if support is broken and price moves lower.  We believe the shorts, which there are many at this point in time, are about to feel some serious “squeeze pressure” over the next few weeks.

SPY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 147 ETFs in the Large Cap Blend ETFs category.


This article is brought to you courtesy of Technical Traders, Ltd..


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