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All eyes on SPY


Allsopp
(@mma)
Member Admin
Joined: 7 years ago
Posts: 3231
Topic starter  

Hey guys,

I just wanted to share something with you all as a word of caution over the next few days and weeks. I am a noob and a rookie, I have no idea what happens next and you should do your own research on this topic, but something notable is starting to take place on the S and P 500 weekly chart.

The S and P 500 is a canary in the coalmine for most financial markets. When it performs badly almost everything gets dragged down with it. Even Dogecoin is correlated to the S and P 500. 

We are currently printing Bearish Divergence on the weekly timeframe for the first time since February 2020 when we had the big Covid dump. Divergences show the momentum and strength of buyers or sellers on an asset. When you see Bearish divergence on a higher term timeframe, it means that Buyers are drying up and that sellers are starting to outnumber buyers. Obviously when this happens, price goes down. 

I backtested how the S and P 500 has reacted to Bearish Divergence on the weekly timeframe the last 10 times it has formed and found that the price retested the 55 EMA, 7 out of 10 times. It retested the 21EMA 2 out of the 10 times, which means that only one time in the last 10 formations of Bearish Divergence on the weekly timeframe we saw the Divergence fizzle out without producing a significant move down.

I just wanted to share this with you because I know that all over the internet right now people are talking about everything going to the Moon, so maybe it's helpful to keep these numbers in mind. 

Do your own research on this and let me know what you think.


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HiltzyNS
(@hiltzyns)
Member Moderator
Joined: 2 years ago
Posts: 20
 

nice one mate


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Allsopp
(@mma)
Member Admin
Joined: 7 years ago
Posts: 3231
Topic starter  

I should probably give some indication on timescale for this in terms of when we're likely to expect death and destruction or when the divergence will fizzle out.

Bearish Divergence is usually a fast / reactive signal where the effects are quite immediate. Usually once it forms you get the move within 2 or 3 candle ticks. If this weekly candle closes with Bearish Divergence confirmed, we'd expect this move within 2-3 weeks, but usually it's almost immediate, which would mean next week would be quite brutal.

If we don't get any death and destruction for 2-3 weeks then the divergence will have fizzled out although we're in a position now where it's dangerous to buy dips and be big on stocks because everything is up hundreds of percent and a rugpull is inevitable.


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