$SPY Bull Trap or Bull Flag?

25 thg 2, 2022

A lot has happened since we last touched ATH's during the first week of January. A lot going on with the Central Banks and interest rates, inflation, and now Russia. Just in the first month of the year, we saw a +10% decline in the SPY. Then going into February there was a double top pattern lots of us detected and were able to play.

Speeding things up to today, we encountered a bizarre day of trading which included a rally of more than 4% from the open. What has me thinking this might be a bull trap is the blatant head and shoulders pattern most of us have been able to point out (not drawn out in this chart). Also, big money has been moving towards the energy sector and away from growth/tech stocks. To me, this is a big red flag. As you can see in my chart I have drawn out a down-trending channel which I believe we will continue to follow. We may float around the $430 price going into next week but can see us eventually breaking down.

I have a resistance line drawn at $450 where we failed to break out of during the beginning of the month. We then recently broke under the $430 resistance line which acted as previous support during the +10% drop we saw in January. In the next few days, we may see a breakout which I do not believe we'll be able to hold. My next support line is at $390 but I believe we might find some support at $415 if we continue the downward trend.

There's a lot of uncertainty in the financial and economic world. I believe we're well into a bear market and don't believe today's high volume was the validation we needed for a reversal into a bull market.