Despite breaking below the red trend line dating back to 2012, SPY bounced on a weekly basis quite forcefully off what looks to be a more important trend line. In fact in comparing the 2002-2008 bull market to the current, both have very similar structures. The current market has clearly had a much steeper ascent in prices compared to 2007, but both are similar in that a multi year price channel formed that was ultimately broken to the upside.
Both successfully back tested that channel break before going on a quick ascent in prices. As of two weeks ago, both now have successfully tested the trend line for a second time. In 2007, that test set up a multi month move to marginal new highs before running out of steam. It's quite possible the bounce last week off this trend is also setting up for this same move. A shorter term pattern linked below also supports this. If so, I suspect prices will put in new ATH's in Nov with a final target of 208-212 in late Dec or Jan. The new highs in 2007 were short lived and prices went back to test the line once again, this time leading to a break and a very quick move to the bottom of channel. If this same line of our current bull market is also breached, I would expect a similar fast move to the lower channel. In 2007 the final leg higher did put up a divergence with the weekly RSI, something worth watching to see if the current market will follow the same path.
Both successfully back tested that channel break before going on a quick ascent in prices. As of two weeks ago, both now have successfully tested the trend line for a second time. In 2007, that test set up a multi month move to marginal new highs before running out of steam. It's quite possible the bounce last week off this trend is also setting up for this same move. A shorter term pattern linked below also supports this. If so, I suspect prices will put in new ATH's in Nov with a final target of 208-212 in late Dec or Jan. The new highs in 2007 were short lived and prices went back to test the line once again, this time leading to a break and a very quick move to the bottom of channel. If this same line of our current bull market is also breached, I would expect a similar fast move to the lower channel. In 2007 the final leg higher did put up a divergence with the weekly RSI, something worth watching to see if the current market will follow the same path.
