SPY: The New Normal
Diupdate
Remember, like, 6 months into COVID when everyone was like "Masks, not seeing your friends and family, and social distancing are the 'new normal'"?
Well, welcome to the "new normal" of the stock market 2022 - TBD, with severe swings up and down at the flip of a coin and very little logic backing these moves. I mean, there is logic for this to come down, but like, retracing back from 415 to like 450 in a matter of days is ridiculous. But alas, I truly do anticipate this to be the new normal. If I had to haphazard a guess, the way SPY has been trading, I would think that we will be enduring this for maybe 2 ish years, just based on the tech bubble burst and the 2007/2008 crisis. I think we will probably fall roughly in the middle (this is just speculation) and so we can anticipate this to continue for the foreseeable future.
Ideal situation is this nonsense comes to an end by EOY, but I am not holding my breath.
But you know the good news? 4 months down!!!! Congrats! You've made this this far! Seriously though, if you are a swing or day trader and you have made it this far, even if you have been losing but still showing up, you deserve a kudos for your perseverance and patience! It has been trying times to say the least and you deserve praise!
I was going to just post a stock levels post, with the ranges and breaks for tomorrow on various stocks tomorrow because those are the posts that help people make money! But, with the volatility right now, I just don't feel comfortable sharing this information until I see how tomorrow pans out. I will share the levels for SPY though, but keep in mind that right now, things are extremely volatile and I myself am reluctant to put too much faith in it! I will post one at some point this week with my usual stocks (QQQ, AMZN, BA, etc.). to hopefully help you all with some actionable info!
Seeing futures right now just tanking hard, I do anticipate a bounce tomorrow and so I just wanted to issue a warning, don't FOMO short at market open tomorrow! Because I really do anticipate this to hard bounce.
But for now, let's just recap where we stand with SPY. I will refer to my scatterplot, because I find the scatterplot far more powerful than the candlestick chart (statistics is the best!):
So, here you can see that we have regained our progress towards that $400 mark, which just happens to be resting on that quadratic line. Great news!
Currently, the linear line sites at roughly 320 - 340 ish dollars. But you can see how the linear and quadratic lines are moving targets, so each day that passes, the target incrementally increases.
However, the interesting part about right now, is based on the quadratic line, this week, we should be resting at $400. Which means, that if we see SPY hit the 400 range this week, then we literally have made contact with our quadratic line and thus we have somewhat of a quadratic reversion to the mean!
Which is FANTASTIC! Because then it levels the playing field and we can say that all of the indices have normalized back to their trading range.
Will it stop at 400? No, I don't actually think so. 400 is the HIGH range of a pseudo normal trading range, we can expect it to overshoot this range down into the 300s. 400 is a psychological level as well, so I do anticipate some dramatic behavior around there, but statistically, things don't get really erratic until we hit that linear line. You can see this from the scatter plot, the price likes to bounce around above, below and on this line frequently.
This is all interesting, to me, but what does it mean? Well, let me just summarize the key points of the data here:
- 400 is fast approaching! Will it be this week? Maybe! Data is promising in this area.
- My more conservative time series model (the model that predicted a trading range between 446 and 436 last week), thinks that our range this week is 420 - 444. Same principles apply here. Bearish break of this weekly range would be closing below 420, bullish break would be closing above 444. I am hoping to see conviction down to 400 this week, I think that this is in the realm of possibilities based on what we have seen thus far.
- Based on futures behavior and RSI, I anticipate a bounce on Monday. If this continues to sell into Monday, I will be floored. Because that would be pretty shocking to see such conviction from SPY after all of the games it has been playing lately.
- ES futures model data thinks that SPY will probably not be able to break over 436 tomorrow.
- My actual SPY model places a trading range for tomorrow between 420 and 434 with a bullish break being over 431 and a bearish break being a break below 423.
- After the dramatic moves we had Thursday and Friday, probability has vastly been shifted. We are now sitting roughly over 53% to see closes below 442.
- Consensus among the calculations is that this will cap out at 444 if it does see the 40s again this week. Let's hope that that holds out as true! It is promising that both calculations and my time series model places 444 is kind of the top.
That's it!
Trade very cautiously tomorrow if you are a day trader because it will be wild! Thursday and Friday were no bounce city, and I hate days like that! I am happy to see the selling, but I hate when there are no bounces.
Take care everyone! Leave your questions/comments/critiques below.
Well, welcome to the "new normal" of the stock market 2022 - TBD, with severe swings up and down at the flip of a coin and very little logic backing these moves. I mean, there is logic for this to come down, but like, retracing back from 415 to like 450 in a matter of days is ridiculous. But alas, I truly do anticipate this to be the new normal. If I had to haphazard a guess, the way SPY has been trading, I would think that we will be enduring this for maybe 2 ish years, just based on the tech bubble burst and the 2007/2008 crisis. I think we will probably fall roughly in the middle (this is just speculation) and so we can anticipate this to continue for the foreseeable future.
Ideal situation is this nonsense comes to an end by EOY, but I am not holding my breath.
But you know the good news? 4 months down!!!! Congrats! You've made this this far! Seriously though, if you are a swing or day trader and you have made it this far, even if you have been losing but still showing up, you deserve a kudos for your perseverance and patience! It has been trying times to say the least and you deserve praise!
I was going to just post a stock levels post, with the ranges and breaks for tomorrow on various stocks tomorrow because those are the posts that help people make money! But, with the volatility right now, I just don't feel comfortable sharing this information until I see how tomorrow pans out. I will share the levels for SPY though, but keep in mind that right now, things are extremely volatile and I myself am reluctant to put too much faith in it! I will post one at some point this week with my usual stocks (QQQ, AMZN, BA, etc.). to hopefully help you all with some actionable info!
Seeing futures right now just tanking hard, I do anticipate a bounce tomorrow and so I just wanted to issue a warning, don't FOMO short at market open tomorrow! Because I really do anticipate this to hard bounce.
But for now, let's just recap where we stand with SPY. I will refer to my scatterplot, because I find the scatterplot far more powerful than the candlestick chart (statistics is the best!):
So, here you can see that we have regained our progress towards that $400 mark, which just happens to be resting on that quadratic line. Great news!
Currently, the linear line sites at roughly 320 - 340 ish dollars. But you can see how the linear and quadratic lines are moving targets, so each day that passes, the target incrementally increases.
However, the interesting part about right now, is based on the quadratic line, this week, we should be resting at $400. Which means, that if we see SPY hit the 400 range this week, then we literally have made contact with our quadratic line and thus we have somewhat of a quadratic reversion to the mean!
Which is FANTASTIC! Because then it levels the playing field and we can say that all of the indices have normalized back to their trading range.
Will it stop at 400? No, I don't actually think so. 400 is the HIGH range of a pseudo normal trading range, we can expect it to overshoot this range down into the 300s. 400 is a psychological level as well, so I do anticipate some dramatic behavior around there, but statistically, things don't get really erratic until we hit that linear line. You can see this from the scatter plot, the price likes to bounce around above, below and on this line frequently.
This is all interesting, to me, but what does it mean? Well, let me just summarize the key points of the data here:
- 400 is fast approaching! Will it be this week? Maybe! Data is promising in this area.
- My more conservative time series model (the model that predicted a trading range between 446 and 436 last week), thinks that our range this week is 420 - 444. Same principles apply here. Bearish break of this weekly range would be closing below 420, bullish break would be closing above 444. I am hoping to see conviction down to 400 this week, I think that this is in the realm of possibilities based on what we have seen thus far.
- Based on futures behavior and RSI, I anticipate a bounce on Monday. If this continues to sell into Monday, I will be floored. Because that would be pretty shocking to see such conviction from SPY after all of the games it has been playing lately.
- ES futures model data thinks that SPY will probably not be able to break over 436 tomorrow.
- My actual SPY model places a trading range for tomorrow between 420 and 434 with a bullish break being over 431 and a bearish break being a break below 423.
- After the dramatic moves we had Thursday and Friday, probability has vastly been shifted. We are now sitting roughly over 53% to see closes below 442.
- Consensus among the calculations is that this will cap out at 444 if it does see the 40s again this week. Let's hope that that holds out as true! It is promising that both calculations and my time series model places 444 is kind of the top.
That's it!
Trade very cautiously tomorrow if you are a day trader because it will be wild! Thursday and Friday were no bounce city, and I hate days like that! I am happy to see the selling, but I hate when there are no bounces.
Take care everyone! Leave your questions/comments/critiques below.
Catatan
Weird day! Crazy day! Its not over yet, but man, it was CRAY!Market hasn't closed yet, but I just closed out all of my trades. Predominately played IWM today because it was respecting the levels I had forecasted on Friday and those lined up fairly well with the levels being predicted today.
SPY on the other hand was a nightmare, same with QQQ. QQQ fairly early hit its bullish conviction target, so that was set for over 326. It went all the way up to 327 and then seemed to have some trouble getting back up. Threw me off so I stayed away. But it held up to this prediction by retracing back later in the day.
SPY on the other hand. Lots of games. Very much consolidation day, until the end of the day. At 3 pm (1500), my math model said that this was going to test 427 by EOD. And I was like "Are you NUTS?! No way!!!", but I decided, I would be pissed with myself if I missed that much of a dramatic move. So, conservatively, got in on just 2, 426 0DTE calls, filled at 0.49 a piece, for a whopping total of .99.
And man, one of the best 100 bucks I ever spent! Thank you again statistics! lol
Anyway, we have now brought ourselves out of the oversold region on all of our indices (DIA, QQQ, SPY, IWM). SPY will close I am sure above 420, so while we did test 418 today, we can't say that this has committed to a bearish sentiment yet this week, we need to see a close below 420 (the reality is its far too early for this to decide what it wants to do this week, it was far to oversold for it to truly make any commitment to continued bearishness, so we will see what happens mid week). As of right now, I would call this consolidation. Just looking at it, maybe I expect some selling tomorrow. We'll see. Either way, I am happy with the results!
Oh but did have a loss. I swung a single contract (Call) into today just in case there was a gap up. MISTAKE! I stopped out of that position. But marginal loss which was obliterated by earnings today.
Take care everyone! Leave your comments/questions below!
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