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Bounce For Bears Or Bulls?

Hey Market Pilot,

Last week the S&P 500 (SPY) was able to hammer out a bottom at the weekly 21 exponential moving average (EMA), which was something I was looking for. But I have been guiding traders that it’s what comes after that bounce that will determine the next major move.

If the SPY is able to do some wiggling around and continue to find support after the bounce off the weekly 21 EMA, then we could see the long trend resume sooner than later. But if the bounce is met with resistance, and the subsequent pullback does not find support, then we should be prepared for the SPY to sink lower and possibly head to those previous lows. 

It could get even worse and price could fall back below the original weekly 21 EMA support.Be prepared for that possibility. This is actually good news because having the market correct even further would provide a more fertile ground for strong upside moves once the dust settles. This is how opportunity is created. We need the market to pull back and correct in order to allow room for prices to launch. It’s like pulling the rubber band back on a slingshot. 

For right now, we are right in the middle of a direction change. I say this because the SPY is exactly between the hourly 50 simple moving average (SMA) and 200 SMA and hasn’t tested either of them. The immediate path is unclear. Even if price moves up first, that could be into resistance and be the trigger for price to fall lower. Or if price heads lower first, we need to wait and see if the hourly 50 is really support.

The daily chart is also still undecided as we have the fast-moving average below the slow-moving average which indicates a bearish tendency, but also price is going sideways. We have to continue to wait and see what unfolds while keeping a few scenarios in our mind so we can make sense of any path that unfolds.

Your Profit Pilot, TG

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