On Monday 21 Feb 2022 (note US Presidents’ Day Holiday) 10.38pm, I emailed Clients my latest post titled 'Let it go!'.
'Dear Clients
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It's been a month since my last post and let's check up on the health of Mr Market!
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From the attached S&P500 Index (SPX) Chart, reference to Point 1, 2 & 3:
S&P500 Index Daily, 10-mth
1. Since the 24 Jan massive price rebound, you will note that the price rally got stopped out exactly at the 61.8% Fibonacci retracement level in early February. The 61.8% level is a common resistance level when price attempts to claw back from where it dropped from.
More about Fibonacci Retracement here: https://www.investopedia.com/terms/f/fibonacciretracement.asp
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2. Said price rally is also resisted by 1st the purple Bollinger Bands Midpoint line & then the blue 50-day EMA.
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3. Price action is now back into the lower segment of Bollinger Bands.
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Short term verdict?
It appears that a lower low is looking inevitable as price action exhibited textbook weakness in the past 3 weeks. In this lower low scenario, the likely downside target zone is possibly near the SPX 4000 region. However, the most extreme & fearful downside target will be at 3700 if a potential bearish Head & Shoulder Formation executes authoritatively (I'm not going to sugar coat here).
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Lastly, the best case scenario now is that price action can bounce off here back into the upper segment of Bollinger Bands to retest Feb highs, which will then result in neutral price action (trading range) for a few more weeks.
If you ask me, I would prefer to actually 'Let it go!' (as Elsa in 'Frozen' would sing to it) & take the more 'evil' lower low route to 'finish' up with this correction, so that the next rally can kick off in earnest.. Watch this space closely! . Live Long & Trade Well. . Thank you & regards . Thomas Ng, CMT Principal Trading Representative 首席股票经纪 www.thom-ng.com . #plsreaddisclaimer #chartforillustrationonly #spx21feb22 #befluid #wytant #livelongandtradewell Chart source: tradingview'