When I posted a couple days ago that the S&P 500 (as represented by the ETF $SPY) looked to be in the middle of a measured move, I had no idea that the move would complete as early as today.
But it did.
With a -6% drop we moved to and past the bottom target area with relative ease.
Here’s the chart:
Now that’s some symmetry for you.
So where to now?
Like I said in my previous post, predicting the future is impossible — the market is going to do whatever it wants to do, but if this is a head and shoulders top then the next move is back to the neckline to kiss it goodbye.
What’s the psychology behind a move like this?
Well, after this drop, bottom feeders and dip buyers will come in. If they succeed in pushing price up, by the time price gets back to the neckline, everyone who bought there on the way down, hoping for a bounce, but instead found themselves trapped through the drop, will start selling, thankful to be getting out at break even.
And the drop resumes.
If this isn’t a head and shoulders pattern, then your guess is as good as mine. Just be ready with a plan of attack for several alternatives and you will be fine. For instance, if the market continues down, what will you do? If it bounces, what will you do? If price just sits there, what will you do? Have your plan ready! Until next time, let’s ROCK these markets.
And don’t forget, cash is a position!