The following evidence will be presented to highlight why the path of least resistance for the the SPY is much higher & about to takeoff on a multi-year bull run.
1) Two Major Support Levels Being Held
2) Macro Pattern Cultivation/Recognition
3) Inverse Head & Shoulder Bottom
Breakout Above Neckline
Retest of Breakout
Reversal of Retest
4) Year Long Bull Flag Breakout
The SPY is currently setting up for a multi-year bull cycle. We understand sentiment & imagination run emotionally wild in the market. Many refuse to believe that the market making new highs is much stronger in probability than the market "tanking" as they like to say. Understandably so considering the market has been in a sideways ranging pattern since December of 2014. Much of that range has been afflicted with heavy volatility that has really tested & exhausted investor mettle.
BotTrigger is neither staunch Bull nor Bear. We look at the data on deck and then it's rigorously analyzed for probability. There is a very defined paradigm of engagement with how the Buy & Sell signals get triggered. Right now we're seeing evidence to suggest that the market is on the precipice of the next major bull cycle.
Not just new highs, but rather a continuation of the trend that proceeded this 2-year caged bull. Let's look at some of those signals:
Evidence #1 → Two Major Support Levels Being Held + Bounce of the 21
weekly view | click to expand
$213 range held by 2 major support levels (highlighted in green). What we have above is price action authoritatively bouncing a convergence of 2 major support lines. We also have a bounce of the 21 week moving average. This area has historically been respected in bull trends. This kind of alignment can look cute but it's seldom enough to declare victory and is usually more of a "lets wait and see how this all plays out."
But we have much more as we'll address below.
Evidence #2 → Macro Pattern Cultivation / Recognition
weekly view | click to expand
In the above pic, we can see a clear cut inverse head & shoulder, also known as a "Head & Shoulders Bottom (Reversal). This formation is one of the most credible reversal patterns there is, this and the double bottom, or W formation.
This pattern is statistically superior when considered within a MACRO sample of data. The larger the time frame data, the more accurate the win-rate is when forecasting the outcome. At BotTrigger, we're mostly always looking at the big macro picture to identify breakout & breakdown trends. The statistical win rate on this formation is very high when you consider a large sample of data. The win rate is much lower when examined under shorter time frames such as minute, hourly, and even daily time frames (which all have higher false signals or fake-outs) than when dealing with the weekly, monthly, and/or quarterly time frames. What we largely focus on is identifying pattern cultivation on weekly, monthly and even quarterly time frames. Why? Because Mr. Market is very noisy and full of sly hands. That's a post for another discussion. Point is, Macro time frames on record, have a much higher win ratio then shorter term time frames.
Evidence #3 → Inverse Head & Shoulder Bottom With 1 Year Worth of Data
So as we can see in the pic here, this reversal Head & Shoulder Bottom has been cultivating for nearly a full year.
Not only do we have a breakout above the neckline that is clear cut, but we have the whole shabang for what ultimately confirms recognition of this pattern being valid and ultimately the probability of successfully forecasting future price action. Here it is, we have all 3:
✓Breakout of Neckline ✓Retest of Breakout ✓Reversal of Retest
As we can see in the picture below, we have a breakout of the neckline, followed by a retest of the neckline, and ultimately a reversal of that retest that is underway.
weekly view | click to expand
This is pattern cultivation at its finest and when you get these 3 consecutive behaviors that tandemly respond in in the following relationship, you have the setup for a monster move on the horizon.
Evidence #5 → Year Long Bull Flag Breakout
On top of everything above, another interpretation that can be layered on top of all the other evidence is this year-long bull flag that the SPY has cultivated.
weekly view | click to expand
This is all setting the stage for higher prices in this coming market.
The text book target on this bull flag is approximately $240. Make no mistake about it, $240 is not beyond us. It's entirely within the realm of possibility and more an inevitable than anything else. When and what happens till then will all be a test of patience and being able to see the big picture for what it's really worth. Although there are many other indicators that we layer on top of the above analysis, these are all core concepts that should be appreciated in what's happening right now on the S&P 500 & the markets in general.
That's what we model for at BotTrigger, statistical probability based on a formulaic set of conditions & rules that when achieved, suggest with a high degree of certainty/probability that an asset class is on the verge of a major rally, or potentially looking toppy.
This market is notorious for shenanigans and the regular circus of volatility. The big big picture is in understanding that the trend has cultivated a series of higher highs and higher lows. Until then, the benefit of doubt goes to the buyers.
BotTrigger will update Members with the appropriate trade alert when & if there is change in the analysis.