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Inverse Head and Shoulder

Hey Market Pilots,

This week we saw a constructive bullish pattern workout in the markets known as an inverted head and shoulders. This market performance was able to play out despite the very chaotic news cycle of Trump with COVID and the hot potato known as the stimulus bill. I wrote previously that Trump’s recovery from COVID in a matter of days was actually a pretty good sign for both the pandemic and the economy. And now that the stimulus bill appears to be happening the markets are happy.

In the above screenshot of the SPY Daily, you can see the inverted head and shoulder pattern and where price has been able to break out. This is a great completion of the pattern so the trend is up until we approach previous highs. At that point, start watching out for headwinds as a previous high tends to be natural resistance. You can also see that this whole experience was what I refer to as a Moxie Trampoline setup, price below the 50 SMA but Moxie still positive over zero. This is a high-pressure setup to the long side and it was a good backdrop to have while we waited for price to confirm.

Another view of the market that I like is down on the hourly time frames. Here you can see price has been following the Hourly 50 SMA quite well. I was prepared for a deeper pullback below the 50 SMA last week, but it never came so the trend steadily moved up. Even better is that the 50 SMA is now over the 200 SMA which is another bullish indication.

The market is looking pretty healthy right now. Expect pullbacks to support, most likely the hourly 50 SMA, and then be aware of the pending election and how that could cause the market to act up. Until then, the long side is the place to be.

Over and Out, 

Your Profit Pilot.

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