Why the Market Is Rallying This Morning

The following hourly SPY shows a 5 wave decline from the Feb 16 all-time high.

Our expectation was that the 394 Feb 16 satisfied a meaningful high.

Why? It was a time/price square-out.

Because 394 is 1 full square (360 degrees) up from the September 319.80 low.

Red is 394/395
Blue is 319/320

However, pulling back the lens shows that 394 and 319 vibrate off September 2 and February 28.

Red is 394
Blue is 319
Purple is Sept 2
Green is Feb 28

In other words, the SPY is straight across and opposite the prior major swing high 180 days/degrees ago, with February 28 squaring the prior high price (394) and prior major price low (319) from 6 months ago.

The market is respecting this Combo Time & Price square-out with a big rally this morning in tandem with 5 waves down.

As well, the SPY/SPX is rallying off a kiss of its 50 day line for the second time.

We got a rally off the January 29 backtest of the 50 day m.a.

On Friday, the 50 day m.a. was tested again.

Whether the current test will perpetuate a run to new all-time highs will revolve around the price action at the 20 day moving average currently residing at 386.60.

Importantly, the 20 day m.a. is not declining, so a Holy Grail sell signal will be avoided.

That said, a 50% retrace of the recent down-draft is the 386.30 region, which ties to the 20 day moving average.

The SPY is trading up 4 points pre-market to 384 Monday morning.

386 is in the wheelhouse over coming hours/days.

In sum, many leaders were damaged in the recent selloff.

It will be their action along with that of the indexes as the SPY tags 386 that will speak to whether we get a secondary high or a run to new highs.

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