SPY - Wedge - Go Long

As has been the case of late, I continue to concentrate on short term trades, mostly in the ETFs. This is as much a teaching example as a traded although I am trading it but note that I'm in and out not just in and wait.

Take a look at the SPY chart and the ABCD structure that is forming.
As I mentioned in this mornings commentary the pattern that was taking shape is that of an ABCD structure and should provide long side opportunity for the nimble within the frame work of an intermediate term down trend. Let me try to explain with the benefit of the marked up chart.

See the labels, A, B, C and D? A is the low of the move while B is the initial high on the first bounce. Now the quick trip back down is C and D is the projected move to come that appears to have started today. This works well within the time frames that are apparent (oversold oscillators) and a slow rise that occurs on lower volume would complete the structure.

The reason for identifying the structure is to project the strength/length of the price move. If you measure from A to B and then project that off of C, you can estimate D. Notice that this comes in at 129.67? Now look at the chart and project a Fibonacci retrace of .682 off of the lows. What do you get? 1295 on the SPX and roughly the 129.50 range on the SPY. Coincidence? Probably not. That's the target now and we'll have to watch closely as we try to reach it. That area will probably offer the best shorting opportunity of the year ... unless you caught that first drop.

Also notice that the larger ABCD down structure that we are in with the highs of 1327 SPX (A) to 1245 (B) and now back up to potentially 1295 or so (C). So what's D? If it's a 1:1 projection then the difference between A and B is ... 1213. That is likely the target if we retrace that far. If not that far, then the target is even lower.