Rallies or sucker rallies?
Lets do a quick market analysis
SPY: Weekly chart- The recent rally has already broken the previous downtrend, and manage to pull the market out from the technical bear market. Here, let's me view the bright and doom sides of the current chart analysis:
Bright:
i) The stock is now closing above weekly-30 average.
ii) The MA-30 is clearly flattening
Doom:
i) The volume divergence is happening. The rally is not supported by the volume.
ii) Still lack of a catalyst to boost the stock up with a huge volume
What I anticipate next:
i) Because of the volume divergence, the retracement is sure happening- I hope it will happen as a V-shape recovery can be as bad as a market tanks , as there is no way we can predict and catch a V-shape recovery and we will miss a great chance to deploy our cash
Retracement
How far a healthy retracement can go into?
We can use Fibonacci retracement to have a look.
The best retracement level is at $395 (50% support level) and $403 (61.8% support level). At 395, it is also corresponding to the previous swing high. It is crucial for the stock to hold above this level.
If it break below 395, the last support is at $360, which is not the best scenario but at least the market is forming a base.
The worst scenario is when the stock break below $360, where phase 4 crashing phase continues take force and it will crash further.
In my opinion, the market most likely will retrace up to 61.8% support level, and ding-dong there until the MA30 is flattening.
Not sure what is stage analysis? Watch the video below:
Stage 1 and 2 (bottoming + Bull run) :
Stage 3 and 4 (topping + Crashing):
of course, for long term investing, we can just add the shares as long as it is near to the critical support.
But for investor with limited cash, a less risk bet will be at the point where a confirmed new up-trend is formed, which is indicated by the mark above. If the market manages to meet that level, we should aim for the new market high, if we want to add individual stocks, focus on the strong stocks!
Note that all the charts above are using weekly chart, which is in a view of longer prospective. Thus it will take some times to get the new up-trend is formed.
Daily chart will show reverse signal a lot faster. Similar method can be used, but daily chart has more noise. So, which chart to use, depends on individual risk appetite.
Next, I shall show some stocks which are in a phase 1 bottoming stage, or in a phase 2 advancing stage.
We should always focus to add the strength stocks so when the market is recovering, we can always beat the market and not lagging behind! Imagine if we bet on the wrong stock, the general market up 10% but we choose the wrong stock that down 5%....
Before we start the individual stock analysis, lets look on the previous giant tech leaders (FAAMNG): Meta platform, Apple, Amazon, Microsoft, Netflix, Google.
Can you guess the orders of the strength of these tech stocks right now?
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SpyderCall : good call on using the Fibonacci extension to catch the potential bounce. That is of course if there will be a correction.
SpyderCall : the weekly moving averages are looking interesting to me. S&P 500 had no trouble getting back above the 100 week moving average. and it seems to be showing some resistance at the 50 week moving average. very interesting
JM investor OP SpyderCall : thank you so much for the insight!
let's see if it could hold above MA100, which is very near to the previous swing high.
gain some momentums, then break the MA50 in one go.
but this provided the price can hold at the key level for the coming retracement
SpyderCall JM investor OP : This will be interesting