Market Milestones: Dodge, Duck, Dip, Dive and Retest

[Image] Good morning , The S&P is closing in on its ninth bullish week in a row as the official Santa Rally continues to bring glad tidings and good cheer to the bulls. This rally from the October 2023 lows has been one of the strongest we have seen in recent memory, even rivaling some of the 2020 bull moves. Generally, what follows a vertical, parabolic run up is a quick and steep correction. The pullback washes over the market like a title wave, sweeping away the exuberance and enthusiasm. It resets the market back to more reasonable levels where big bulls want long exposure. All the hopes and dreams of the chasers and FOMOers get squashed as fear and bearish sentiment grip the market and overtake the headlines once again. SPY [Image]( Here are a few examples of the SPY getting overheated and retesting into its long-term moving averages and key Fibonacci levels. After these quick and often violent retests, the SPY pushed higher once again into new highs. Our first examples come from June and September 2020. After blasting off 17% and 20%, the SPY retested back into its long-term moving averages to the tune of -8% and -11% respectively. A similar pattern played out in early 2018 when three months of bullish price action were wiped out in two weeks’ time. The most recent example of this price action happened in November of 2021. Price ran 10% into overbought territory before retesting the 100DSMA and then bounced once again to a new high. That high from January 4th, 2022, is still the all-time high for SPY. The final example is from December 2014 when the SPY had just bounced 14% to reach all-time highs in a span of 27 trading days. Similar events played out in this case like they did in all the rest. RSI got overbought, RSI divergence showed up, price quickly dropped into the long term daily moving averages and retraced at least 38.2% of the recent bull move. July and September 2020 November 2021 [Image]( [Image]( January 2018 December 2014 [Image]( [Image]( There are many other examples of this type of price action playing out over the years. There are also times when a 38.2% retest did not occur, such as August 2009, November 2010 and the whole bullish push in 2019 until the Covid crash. The SPY is currently overbought on the daily RSI, and bearish divergence is beginning to show up. This analysis is a mostly a study pointing towards the next retest being buyable rather than a way to time the top and get bearish. The trend is your friend; however, when buying feels easy, comfortable, and pleasant, that's often a signal to sell, and vice versa. [Image] In 2024, focus on downside risk mitigation, risk/reward, the trend, back-testing and your trading mindset. We will take a deeper dive into each one of these in the coming Market Milestones. Until next time, have a very Happy New Year. Strive On, Yates Craig, RLT & TPN Market Analyst Disclosure: You are responsible for your own trading decisions. ALWAYS, do your own research before investing in any of the above securities. This is not a solicitation to buy/sell ETFs or securities. NEVER invest money in ETFs or stocks that you can't afford to lose. You can lose all of your capital by trading any securities mentioned. These ETFs/securities are very volatile and gain and lose value quickly. We reserve the right to freely trade in any mentioned ETFs or securities. We are not compensated by any mentioned companies. We trade ETFs and securities based on our opinion of intrinsic/possible future value only. We are not registered investment advisors, so always do your own research before buying any securities. Unable to view? Read it [online]( If you no longer wish to receive mail from us, you can [unsubscribe]( Sent from: Real Life Trading in Nashville TN 37221