SPX Review and Outlook

EOW Stats
High: 6,869.91
Low: 6,646.87
Close: 6,734.10
Change: +0.08%
ATH: 6,920.34 (Oct 29)

I’ve been more mindful about not calling declines (as I preface a potential decline 😂), because I have done so prematurely in the past and it’s never served me well. But let’s just take a look at what I’m seeing.

When I zoom out, the larger structure on SPX is starting to look like the early signs of a topping phase. I’m not calling a reversal here, but with the way price behaved this past week, and the structure developing across the monthly and weekly charts, I am seeing more and more of what Mark Minervini describes as a Stage 3 topping, or distribution phase. Essentially, all of the characteristics that show up before a corrective decline.

A quick look at the monthly chart shows the bearish divergence on the SRSI continuing to build. The monthly candle is only halfway formed, but price has not been able to push higher so far this month, and we are still extended. The uptrend I have been tracking from the March 2020 lows has several clean touch points. If SPX does begin a larger corrective phase, that can unfold over a series of months, then that trend line is a natural area it could drift toward. That would line up with roughly a 20% decline, which matches both the divergence and the distance between current price and the monthly 40/50 SMA area.

I also drew an inner uptrend line from October 2023, which converges with the monthly 20 EMA. This is another area that can serve as support, and it sits at about 9% below last week’s close. Each trendline presents different degrees of pullback, with the deeper trend line matching the longer-term structure dating back to 2020, while the October 2023 line reflects the sharper leg of this most recent advance.

On the weekly chart, we closed on the 5 EMA after testing the 10 EMA earlier in the week. Price also tapped the uptrend line I have anchored from May, with buyers stepping in at that level. But overall, we didn’t make any real upward progress, closing in the same general area as last week.

What continues to stand out is how buyers show up on dips, while sellers show up on any push higher. This tug-of-war has been consistent these past few weeks. The weekly SRSI is still heading down, which aligns with the idea that this part of the move is still in digestion or early distribution.

On the daily chart, the behavior has become noticeably choppier. Since mid-September, SPX has been moving inside a range of roughly 2%, popping above it briefly before falling right back in. Over the past three weeks that range has expanded into something closer to 4% and the constant back-and-forth (like last week’s up for 2ish days and down for 2ish days), is the same kind of pattern we saw during last year’s topping structure before the February decline.

Friday’s candle shows buyers stepping in at a familiar support area, but each push higher over the past several weeks has been met with sellers almost immediately. That doesn’t rule out short bursts to the upside next week, but the broader tone of the daily chart is indecisive. The moves aren't building on each other, they’re canceling each other out, and that usually reflects a market that is still in digestion or starting to distribute rather than gearing up to rise again.

How I’m Trading This Week

I’m skipping my scenarios this week, but I do want to share exactly how I plan to trade. This environment has been too erratic to plan beyond day to day.

On Monday, after the morning chaos settles, I’ll see what direction the market is choosing for the day. If we start to resume the upside, I’ll participate, but with tighter alert windows. In this kind of environment, a strong morning can still turn into a failed breakout later in the session, so I want to see whether the move holds. If it does, I’ll manage it the same way I’ve been managing choppier conditions, taking profits before the day ends based on my targets, and leaving partial positions on only if I’m well in the money.

If Monday morning doesn’t have follow-through from Friday’s pivot, then I’ll wait for cleaner structure. If we start rolling over, I’ll shift to puts with the same profit-taking plan and tight alert levels.

I do think there will be opportunities this week, but I don’t think any direction the market chooses will be sustainable yet (not for longer term swings). And even though my broader sentiment has shifted away from bullishness, I’m not ruling out consecutive green days. We’ve seen plenty of periods where the market gives us a last hurrah before breaking down again. I’m staying open to both sides, and will keep closer tabs on intraday structure.

When my intuition says ALL IN! and the technicals say: WAIT WOMAN!

Have you ever looked at a chart, thought this is definitely going up, jumped in, and then immediately found yourself in the red, debating whether to cut it or give it room? And if you did close it, the position turned right around and blew straight past your entry, and you’re sitting there thinking, I fckn knew it.

I’ve done this soooo many times, but it wasn’t until recently that I became aware of my underlying pattern.

When you study charts day after day for years, you do build a really strong intuition. You start noticing familiar structures, the way price behaves around certain levels, the rhythm of a setup forming. That part is valid, but the catch is that intuition only works if it stays in sequence with the technicals.

Both things can be true:
You can have a strong read, and you can still need the chart to actually confirm it.

For me, intuition is what helps create my shortlist each morning. I scan through everything I watch, I look at the daily, I check whether price is holding key levels or EMAs, I note whether the SRSI has reset or turned up. If at a quick glance everything checks out, great, that name goes on my shortlist. But that doesn’t mean it’s ready for an entry, or that it will set up today, or that the 5-minute structure will give me a clean entry.

I (as of a few weeks ago) have been folding in the 5-minute chart to work toward a more precise entry. I wait for the technicals to actually confirm the move on that timeframe, the reclaim of EMAs, the shift in structure, the turn in SRSI, the follow-through, etc. before I get in.

So now when that little voice pops up: This is it!, I don’t jump. I slow down and:

1. Note the first impression without acting on it.
Just observe: Okay, I’m seeing something here.

2. Check in with my emotions.
Is this excitement? FOMO? Restlessness? Pressure to catch something?

3. Drop down to the 5m chart and see if anything is actually setting up.
And if it is, or if it’s close, I start talking it through out loud, what I’m seeing, what the levels are, whether volume supports it, whether the structure makes sense.

So if you’re like me, and you’ve built a pretty strong intuition over the years but you also find yourself entering early, closing early, getting chopped, or doubting yourself afterward… just remember the order:

Intuition = check it out
Technical validation = time to get in

Never the other way around.

Intuition is a guide.
The technicals are the green light.
Keep them in that order!

Thank you as always for tuning in. I’d love to hear from you, reply to this email anytime to say hello or share a comment.

‘Til next time!