Hey Market Pilot,
When the market started pulling back a few weeks ago and we started to lose key support on the daily time frame, it meant that we then had to look at the weekly chart for support. I spent time discussing with the Moxie Indicator™ members and other outlets that the weekly 21 exponential moving average (EMA) was likely to be support and price should bounce there.
The question that remained was what would happen after that bounce?
In the screenshot below, you can see the S&P 500 (SPY) price finding that support at the weekly 21 EMA and holding for now. This is the bounce.
As price moves up from here, we don’t yet know if the up move is into resistance and forming a double top. If that were the case, price would break below weekly 21 EMA support next time it heads that direction. But if this is all the correction the market needed, then we should see prices resume higher after some chopping around in this area.
Let’s look at lower time frames to get a little more clarity.
On the daily chart you can see the perfect Elf Shoe formation that I always talk about. You could even point out an inverted head and shoulders. So this was a nice move up, but it is looking a little extended at this point due to the gap between price and the daily 8 EMA.
The hourly chart is looking very extended as price shot up for two days, putting it well outside the third average true range (ATR) and floating off the 8 EMA.
At this point, a pullback is needed and likely to happen fairly soon. If that pullback is met with more selling and breaking of supporting moving averages, then this could be the start of price moving below the weekly 21 EMA. But if the pullback is to something like the hourly 50 SMA and it generally holds, then the weekly 21 EMA will remain support and the market will carry on to the upside.
The pullback which may be to come will be what tells us the path of the market.
Your Profit Pilot, TG