TLDR: I expect further downside but I do see us filling the gap up to 390 before we do.
On the hourly, we see that the RSI is looking bullish and that the 8/21 EMA is starting to curl up. This is with weak momentum though and I do expect it to fizzle out. We did break 382 partly before getting rejected. I expect us to retest 382 and if we break above, I expect a gap fill to 390. I think that the bearish news about inflation and the Fed being uncredible will be enough to push SPY back down so it’s not a long term bullish situation. Maybe we don’t gap fill, but more likely than not, we’re going to come back down and form a bullish divergence around the triple witching and then get a bear market rally.
On the daily, we can see that we are tracking back to the 8 EMA which very nicely lines up with the 390 gap fill level. There was good volume today, suggesting that a further upside is in store. Overall, daily is looking bearish with a MACD bullish divergence, but with short term bullish move. Looking at the orange line, which is the trendline of the 2 previous lows, I think that we go test that trendline and then form a bullish divergence and rally up. This level would be between the 150 and 200 MA on the weekly chart which is typically when we see bear market rallies/ deep corrections to end. I think sometime around the options expiration, we’ll see that explosive move up and get a short squeeze rally like in March and whether we manage to break above the 200 MA on the daily will determine if this is just a bear market rally or not.
VIX is getting crushed again. Right now, we’re on the trendline support and based on this, there could be the possibility that we see a red day tomorrow because VIX could go back up. Overall, VIX is looking weak as it’s been forming lower highs since the February low. If this is a true bear market, you would be seeing higher highs, but as there’s no higher highs being formed, there is a good chance that this is just an extended correction as this bull market has been magnified by the stimulus checks and all.
Other things to note, dollar and yields were down, possibly signaling more bullish momentum incoming tomorrow. Another thing to note is that PCC showed more puts exiting the markets and nearing the point where we’ve seen markets top recently. This could signal one more green day before a continued dump.
Overall, I do think that we see a rally soon powered by the options expiring and repositioning, but short term, I do see a new bottom that you can get calls at like at 360-365.