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Is the market going to fall or rise next?

When we broke the resistance level last week and rallied up to 2742 level on Monday, we basically reached my previous rally target.

Next S&P 500 trend

There fore I added a “buy” signal to my chart.

Of course, it is not a buy signal meaning I would be rushing to be buying everything and anything at that time but that expresses my bullish bias. I use it to eventually navigate my trades and it helps me to reverse the existing trades if the trend reverses.

Yesterday, I hoped for renewed rally although I knew we reached a Fib target and thus it would be unlikely.

Yet I believed…

And I added my “buy” signal to the chart. Today, I was proven that my original expectations were correct and my new enthusiastic beliefs were wrong.

I am expecting retracement now, so I reversed to “sell” (and I also reversed a few of my put trades into call spreads) to ride this thing down.

But it wasn’t as easy as I would thought. The market was a bit choppy during the day and I noticed that I had a bullish bias although I saw the market as being “bearish” for the time being.

Note that “bearish” doesn’t mean that I expect a bear market or any other catastrophe to happen. This is just a normal short term reversal, retracement, or a pullback after a week long rally. This market needs to take a rest before it continues higher, And I still see this market as bullish which is on its path to make yet another all time high. I do not know when it happens and how long it would last, but I expect it to happen.

And due to a lack of conviction on my side, I was reversing my trades a few times before I decided to leave it as is and trust my observations.

Next S&P 500 trend

Above you can see my “craziness” reversing my trades from put spreads into call spreads, back to put spreads and call spreads again.


So what’s next?


Well, to my disappointment, the market decided to hold the 2700 (actually 2707) level. It can be promising for the market. We held the level, we stayed above the previous resistance, now a new support… so, we should be good. We may go a bit lower to retest that upper trend of the original triangle we broke from but then we should resume the uptrend, or shouldn’t we?

It is thus promising to see the buyers stepping in and hold this market up. If we were poised for a selloff, we would already crash and followed violently down. It didn’t happen.

Next S&P 500 trend

My only concern is that we have returned into the sideways channel (see the dashed lines in the above chart). If that’s the case, this breakout will be a fake breakout. Then we will be returning back to 2585 level. And my trades are not prepared for that eventuality. Reversing them would cost some buying power I am becoming short of.

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