My attempt at analysing the SPY chart after last week (AKA Crayon drawings):
The rally from the lows (likely initiated by massive shorts covering) has been gaining momentum for a while. This last week it has been losing momentum, and the last gap up on low volume looks extremely weak.
Every indicator that I use for spotting possible tops are blinking bright red at the moment:
- Bearish divergence in RSI/MACD (momentum is bearish but chart shows new highs)
- Volume falling (a healthy rally should be on increasing volume, with the green days having significantly higher volume than the red days)
- Chart patterns (Not big on them, but island tops / double tops are usually quite reliable – we now possibly have both)
- Fundamentals are weakening (We are probably in the beginning of the worst recession since the 30s..)
If we get a solid gap down on Monday (to around 282 or lower) and the gap doesn’t close, the double island top reversal pattern is complete, and the market will probably continue down for a bit. Key support-zones are around 270, 240 and 220. Plan accordingly.
TL;DR: Money printer goes BRRRRR, stonks only go up
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.