SPY Hourly Intraday analysis using TD Setup and MACD - Part II

16 thg 9, 2022

In continuation...

From the previous post, the SPY was "due to retrace, with a low probability spike no more than 416 (White line shows the barrier)."

So, it maintained at a stall for the rest of the day and never broke above the high of the Sell SEtup 9th candle (411.73). And the next day, due to a pre-market report release about inflation not abating as expected, the SPY gapped down significantly that wiped out the previous two days of gains.

Very uncanny huh?

Note here that I do find Thomas DeMark nothing short of a genius (especially if you know how (t)his indicator was developed in the age of pencil and paper charts), and his Sequential indicators amazing... thing here is that it has very amazing degree of predictability of turns like these, but cannot tell you the depth of the retracement/trend change.

So here is the break down in simplest terms I can put it...
From the last post, the main reason why we could expect a pivotal reversal was that the Sell Setup (bright green box) was completed nicely ( also known as Perfected ), and this Setup did not complete higher than the TDST (the highest point of the opposing Buy Setup shown in red box with green dotted line at the upper range). What this means is that the primary trend is not bullish, despite the previous days of bullish rally, but is actually a primary bearish trend which is likely to resume after completion of the (second) Sell Setup). The main signal after the Set up completes is the TD Flip... where an opposing set of candles appear. On 12 Sept, the first candle of the TD Flip appeared at closing, and the next day first hourly candle completed the flip. You would see how the TF flip typically (but not always) forms the start of the opposing TD Setup.

Well, there was a fundamental reason that spooked the market really hard to have a TD Buy Setup continue for the rest of the following trading day.

Currently...
After the last Buy Setup completed (red box), it broke down the lowest point of the previous opposing Sell Setup (aka TDST at 398, red dotted line), hence a reiteration that the primary trend is still bearish.
Next, the SPY consolidated and made a weak attempt to break upwards, but ended up with a lower high by a terribly bearish looking doji, which was followed by a lower low. This also started the next TD Sequential Buy Setup that closed the day's trading on candle 7.

Now, turning over to the MACD, it is about to cross under its signal line, in bearish territory.
Looking ahead, Friday is Quad Witching, and it typically promises a lot more volatility. Plus, it is a Friday, and I would think most traders would not like to hold positions over the weekend.
For a better picture of what to expect, we might need to zoom out to the Daily SPY chart.

And... an alarm is set at 388, the most recent last low. Given the significant reversal, the bullish run (as described over the last weekend) was technically invalidated on Wednesday itself. No need for any fancy technical indicators, just one giant Gap Down that closed almost two Gap Ups wins hands down.

Well, I do hope that the hourly analysis of the SPY in these two parts demonstrate how TD Sequential and MACD can be used (together with support/resistance and MA lines) to stay on the side of the trend where it is your friend.
Do be careful, nimble and stay safe!