After a two-year run of support, the market is signaling a shift.
From top to bottom, trend, structure, and momentum in the markets continue to turn bearish. Here’s a look at what we’re seeing as the environment shifts…
MONTHLY CHARTS
The SPY and QQQ fired monthly squeezes to the upside back in early 2020. Those squeezes were responsible for the trend and momentum that we experienced up until recently.
As these squeezes show a loss of momentum, recent closes under the monthly 8 exponential moving average (EMA) open the door for a potential flush down to the monthly 21 EMA. Meaning the market could have plenty more downside to come.
WEEKLY CHARTS
Ever since April 2020, the 21 EMA on the weekly chart has been a major level of support for this trend in both the SPY and QQQ. With Friday’s close, both indexes find themselves heading into the weekend trading under what has been critical support throughout the entirety of this trend.
With a loss of momentum and now structure on these bigger time frames, we are led to believe the path of least resistance will be to the downside. Now, much like when trading the upside, we want to pick our spots wisely with good entries. With that being said, next week we will be looking to short any bounces in the market.
One of our major focuses for new shorts is the IWM, which we closed a profitable short on Friday morning in the Compounding Growth Mastery. We initiated the short on Jan. 10 and closed the position on our move into our $200 target for 85%+ return on risk.
This short was so nice, we’re looking to do it twice.
In the weekend video on Sunday, we’ll be covering these shifts in the market in detail, along with looking at the results of our short setup scans.
The key to remaining profitable as a trader is to stay on the right side of the market. Until things change, our opinion is that the path of least resistance will be lower!
If you haven’t already seen my recent webinar on my 2022 Game Plan discussing win rates, limiting losses, and finding clean setups, watch the free replay here.
Stay Focused!