New downtrend in the SPY? We're close

It always helps to keep multiple time frames in perspective.

Here's a look at the long term (multi month) downward market we've had:

That last leg up is the March rally. Notice how it just hit the top of the trend line. It's following the same pattern as all the previous rallies (nov to january, october to november).

Zooming in a bit, here's a view of our recent March rally:

Take a look at that, then take a look at the chart above it to gain some perspective on where the March rally lies in the overall market.

Now, here's a zoom-out with tracing of recent action:

I'm betting with the longest term trend. If the SPY was hitting the lower trend-line of this channel, I'd take a smaller long position. It'd be small since I'd be betting against the longer-term trend, but with good reason and evidence that it's going to oscillate once more. However, we're about to experience a down-trend within a down-trend.

My assumptions are:

1. The long term down-trend is going to continue.



2. The downtrend will continue to move within a channel, created by oscillations of lower highs and lower lows.

My assumptions will be shown to be wrong if:

1. We experience high lows and higher highs in the context of multi-week rallies and corrections. For this, we would have to break out of the current long-term channel drawn.

I haven't been paying much attention to the daily action during the past week, because I'm thinking in a 3-5 week timeframe. Also, so long as my assumptions about this downward market aren't shown to be wrong, my plan (based on those assumptions) is valid.

Follow the trends. If you are patient enough to confirm reversals, you'll only be wrong once, and the one-time loss of a reversal will be surpassed by your wins.

The new possible downtrend in the SPY will be confirmed if we get another small rally that doesn't surpass the last one. Once that turns over, it's time to get short!