Hey Market Pilot,
The indexes have been on a strong rally the last few days and the S&P 500 (SPY) and Nasdaq (QQQ) have pushed higher than I originally expected. This had me looking around at the last time we saw something similar which was October of 2020. The chart patterns are remarkably similar, but with two differences I will point out.
To begin with, in the similarities pictured below you can see both time periods have had price cross over a flat daily 50 simple moving average (SMA). The move past this moving average was strong with momentum which caused price to move away from the daily 8 exponential moving average (EMA) so much that there became an unsupported gap.
That gap was eventually filled and then some, as price fell back below the daily 50 SMA last year. Will the pullback be as brutal this year? No idea.
One difference that may cause problems is that the daily Moxie Indicator™ is negative and below zero this year, while last year it was positive and over zero.
One other thing to note on these time frames is the volume profile.
In 2020, volume didn’t really have anything specific to call attention to it, but this year there is a steady decline as price continues upward. We will know later if that matters.
As for the hourly charts, last year saw price run-up and pull away from the 50 SMA support (pictured below) while also pushing itself outside of the third average true range (ATR). Add in the double top and that was what took price down.
This year, we are seeing a similar run-up, but this time it seems more extreme. Price has pulled away from the hourly 50 SMA right away and has been riding outside of the third ATR for much longer. Often extreme moves one way are met with extreme moves the other way. So I wouldn’t be surprised if price pulls back as fast as it pushed up.
Be cautious and watch out for a pullback!
Your Profit Pilot, TG