Re-Test and Rejection for S&P?
The S&P (using SPY as my proxy here) has posted a furious rally over the last two weeks. Friday’s sell-off put a dent in the positive mojo, and could be telling. The S&P tested and closed below the bottom trendline in the big rising wedge that had formed over the last two years. (The chart below is logarithmic. A linear chart would have the bottom trendline around 1250 – where SPY bounced two weeks ago).
Most charts have broken out of their downtrends and are re-testing old highs or old upward trendlines that they’d broken under. Maybe it’s neither up nor down and we’re just stuck in a 1250-1350 range. Next week will be interesting.
Importantly, this week’s action also leaves the possible Head and Shoulders that I’d mentioned in previous entries in place. I think I’d rather be short than long at the moment, with pretty tight stops in place should the upside momentum resume.