03/24/23
All hell has broken loose over the past two days.
Treasury Secretary Janet Yellen and Fed Chair Jerome Powell flipping their own scripts and giving us contradictory messaging.
My favorite headline this week came from Reuters.
“What Powell giveth, Yellen taketh.”
Is there more chaos headed our way?
With the type of mixed messaging we are getting, I would say that is likely.
Here’s the Friday SPY update:
Above is the 4-hour chart.
No, I’m not exactly ecstatic about what I put on the chart, but I’m just analyzing what I see.
There are a few things to unpack here.
I took the 4-hour chart because the pattern that I’m seeing is much smooth without losing the detail.
You want the picture — not the brushstrokes.
Looking left, you have bottom consolidation into three distinguishable moves higher just before the selloff begins.
And on the way down, there’s a pitstop at each one of those levels to tease traders.
But fast forward to the second half of the chart with the consolidation from late last year into the beginning of January…
If you think it looks similar, you are correct.
The only problem is that part of the pattern hasn’t played out… yet.
I highlighted the last leg and created a chart analog to play this one through, putting SPY close to ~$360.00.
If this is your typical “sell model”, then the price should fall below the previous range from December and January.
A couple of other things…
The red arrow points out two clean candlestick wicks. And these rarely last long before being traded through.
In the same area is the breakdown of the recent trendline to the upside as of yesterday.
Way to go bulls…
But there’s one last thing you need to check out.
That light bulb is sitting over a massive gap in the price action that has yet to be filled.
What do we know about downside gaps?
They tend to get filled.
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