The SPY (S&P 500 tracking ETF) has set up in what appears to be a bear flag continuation pattern. The projected measured target for the pattern, coincidentally or not, comes in right around the final near-term target at the 179.30ish area that was added to the last 120 min SPY chart posted a week ago. With the SPY now approaching the 38.2% Fibonacci retracement of the previous thrust lower (which is the flagpole of this bear flag pattern), I will be watching closely for a downside break of the pattern which could be the catalyst for the next thrust lower in the markets. If this pattern were to play out, the move towards that 179.30ish downside target would likely be as impulsive as the previous thrust lower as the symmetry on both the move leading up/down to a bull/bear flag and the subsequent move following the breakout of the pattern is usually pretty close.
Zooming out to a 120 minute time frame on the QQQ (Nasdaq 100 Tracking ETF) we can see that the near-term downtrend that has been in place for just over a month now is still very solidly intact. The Q’s have now retraced 38.2% of the previous thrust lower (from the April 2 & 3 highs) and could turn lower at any time but there’s also plenty of upside left before the bearish near-term trend is called into jeopardy, particularly a break above the yellow downtrend line on this chart. Being that the market has now retraced about 38.2%, a level which is typically the minimum retracement for a counter-trend bounce, this might be a good time to start adding or initiating short exposure. As such, I plan to post some new short setups and possibly highlight any existing short trades that look to offer objective entries or add-ons.