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What to expect from SPX next week?

I am not trying to predict where the market would go next week. I simply do not know it and I am as clueless as everyone else. Will the market shoot up next week or will it fail and fall again?

If I cannot predict the market, I would like to at least establish a boundaries within which the market would move next week and position the trades accordingly.

Last week, in my post “Futures indicate very weak opening tomorrow morning” I did that and established those boundaries.

 
SPX weekly review
Note, this picture indicates last week review.
 

I established (as you can see above) that the market may move within approx. 1975 – 2082 range and on Friday before my trade expiration I could see that the maximum level on the upside was 2076 as I published it in my newsletter issuance “SPX bear call spread 2080/2085 expiration of adjustment” sent to my subscribers last week.

The market reached 2074 that day and then reversed. After a sell off it closed at 2055 level letting our bear call spread expire worthless for the full profit of a received premium.

Can we establish the same range for the next week? I hope so. Here is what I expect from SPX next week.

First, we had a few significant events happening last week. For several weeks, the market was consolidating in a wedge pattern, see below image. On Thursday the market broke up thru that pattern.

Unfortunately, on Friday it closed down making this a false breakout.

 
SPX wedge
 

The failed confirmation corresponds with another pattern the market has been enclosed in: sideways channel. As you can see below, the market attempted to break thru both patterns, the wedge and the channel, but then returned back into the channel.

 
SPX channel
 

For both of the reasons above I am still bearish and think the market will continue down next week. That means, that I may try to open either a bear call spread or Iron condor (leg into the condor as the market falls down).

However if opening either trade I want to make sure to be safe in case it will not go as planned. So what is my expectation then? See the chart below:

 
SPX weekly review
 

As you can see, if the market fails to move up and confirm the breakout, the move down can be quite violent. For this reason we would like to wait on Monday, what the market wants to do and based on that to position my trading.

Let’s see tomorrow.

Happy trading!
 





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