Market Milestones

RLT Newsletter 4.16.26

Markets closed higher once again on Thursday, marking the 12th consecutive green close for QQQ. There’s a fierce debate right now over whether this is one of the most savage bull traps in history or the start of a face-ripping rally that could last for months.

QQQ Daily Chart

History shows it can go both ways. We’ve seen steep, vertical rallies mark the final blow-off top before major declines. One example was October to November 2021, just before the 2022 bear market. SPY dropped roughly 5%, then ripped nearly 10% in a straight line over the next month before topping out and rolling over hard.

We saw something similar in October 2015. While SPY didn’t make new all-time highs like it just did, sentiment turned extremely bullish after a steep 13% move before rolling over and making new lows.

Of course, the example getting the most attention right now, especially from bears, is March 2000. I’ve gone through that period before, so I won’t belabor it, but it’s the closest historical comparison to what we’re seeing today. A sharp ~10% drop followed by a vertical move back to all-time highs in a just a number of days.

On the bullish side, we’ve also seen breakaway gaps and lockout rallies lead to sustained upside, like in May 2020 and November 2023. In 2020 we made new all-time highs, pulled back to the 100-day SMA, held and bounced off of the average twice, and pushed higher for the next year. It shows just how important the 100-day SMA is here.

There’s even a comparable setup in October 2014 that does not fit the bull or bear narratives. The market gapped above the 200-day SMA, pushed vertically into new highs, and instead of collapsing, it chopped sideways for nearly a year before any meaningful move.

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I don’t have a crystal ball. No one does. The job is to read price action, identify high-probability setups, focus on strong risk-to-reward opportunities, protect capital and pivot when wrong. Anyone claiming they know exactly what happens next is lying. All we can do is build a plan and execute it.

If the bears are right and this is a bull trap, it’s one of the craziest I’ve ever seen, right up there with some of Bitcoin’s best. The level of bullish enthusiasm and high-fiving on this move is, anecdotally, as high as I can remember. For now, it’s not my primary scenario, but if we start breaking key levels, I’ll take that idea seriously. I’m currently positioning for continuation, so I’d take some losses if that plays out, but I’ll pivot quickly.

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The key level I’m watching is the 100-day SMA. A breakdown below that level, especially if it happens quickly over the next couple of weeks, would be an early warning that something larger could be unfolding. At that point, I’ll get more cautious and begin protecting and stopping out.

If we then lose and close below the 200-day SMA, I’ll fully shift to the “this was a bull trap” thesis. The cool thing is that this would likely happen only about 5% off all-time highs, giving plenty of time to hedge and protect against a more meaningful drawdown.

SPY Daily Chart & 1999 Analog

We’re also entering earnings season, which will be critical. The Trillion Dollar Titans need to participate for this rally to sustain. If we start to see breakdowns from those leaders, that’s a major red flag for anyone expecting a continued vertical move higher.

I’ve been in profit-taking mode over the past couple of days, possibly a bit early if this lockout rally continues. Going forward, I’ll be looking for better entries on consolidation or weakness, while keeping risk tight.

I still expect larger volatility at some point this year. If SPY pushes into the $720–$740 range and hits those upside targets before that volatility shows up, great. If not, I know the levels where my positioning changes.

The upper trend-line of the parallel channel is a major resistance level, and given current valuations along with the broader macro backdrop, I’m not convinced we get a sustained breakout above it like we saw in 2021. That level, along with the 1.618 extension of the recent drop, continues to define my major upside targets.

SPY Parallel Channel