Fourth of July: The Fireworks Are Early This Year

Onto some technical analysis/battle planning:

There are two downtrend lines in play, major downtrend=A. Minor downtrend=B. If SPY tests tests trendline B earlier in the day that would be a great place to short. 107.8 had provided support and will now act as resistance as well. I am 70% confident SPY drops to 106.01 today to fill the gap, however they may prolong the drop until next Tuesday as well. Remember that gaps aren't necessarily support levels so the next support below 106.01 is 105.5.

I will begin opening long positions at 105.5, I expect some degree of capitulation style selling to take place and SPY may drop as low as 102, but one thing we've learned is that SPY reverses very quickly when it drops below 106 indicating that SPY 102-105 is strong support and I'm counting on that support to hold.

WATCH FOR A BREAK FROM TRENDLINES A AND B TO SIGNAL A TREND CHANGE. If SPY does not break these trendlines then there is no trend change and I will have to evaluate further downside targets.

The fourth is coming early this year and I'm expecting a lot of fireworks in the next few days. Here is some advice: play it small with the scalping, gradually phase in to your long positions and for the love of God don't go all in.

After SPY makes a low below 106.01 it will definitely bounce and drop again- forming a W reversal pattern. All lasting strong reversals are W shaped, not V shaped. So don't go chasing the market after the first bounce. Focus on getting awesome entries on your long positions- that's where the money is made. It's better to have a portfolio with 40% awesome long entries than a portfolio with 80% mediocre entries that you could get anyday.

Finally any gap up will get stuffed today.