Party Like It's 1999!

Fun With Analogs

The market continues to rip higher day after day, with SPY now up 10% in just 10 trading sessions. It’s an incredible and historically bullish move. When we gapped above the 200-day SMA on April 8th, I studied the entire history of the SPY chart, and the closest historical analog I could find was October 28th, 1999. So far, that analog has been spot on as we rip into new all time highs.

If you’ve been following along with me, I did not call the bottom. That never happens and is not necessary to make money. What I did do was shift bullish on March 31st after a massive reversal candle printed with the highest bullish volume in over a year. At the time, I was expecting a lower high followed by a move to new lows. But once we got the April 8th explosive gap over the 200-day SMA, which closely mirrored the 1999 setup, I adjusted once again and became more open to a more aggressively bullish setup.

That’s the job as traders. We follow price, not predictions. We adapt when the market proves us wrong, and we focus on high-probability setups with strong risk-to-reward. Historical analogs are a tool I love to use, but they are not a guarantee. They work until they fail, just like anything else. In this case, the 1999 comparison helped highlight what was possible. While many traders were surprised and caught off guard by the strength of this move, it’s actually tracking very closely to the 1999 analog highlighted over a week ago. It helped set my expectations that price could continue higher without a full retest of the gap and push to new all time highs in short order, even though that was not what I thought was likely just one day before.

SPY 1999 Analog

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From here, I still think the most probable path is something similar to the 1999 playbook I mapped out on April 8th. That would mean a push to new all-time highs this week, followed by a period of consolidation and a pullback, potentially as deep as the 100-day SMA. From there, a continued grind higher toward the long-term trendline that has capped SPY since the 2008 bottom.

At that point, we could see a deeper pullback, possibly retesting the April 8th gap level, before one more leg higher. After that, if we continue to track the 1999 playbook, I would expect larger volatility to enter the market.

This framework gives me a structure to trade against. My simple rule of staying bullish above the 200-day SMA and bearish below it has worked extremely well, but I prefer having a more detailed roadmap, and that is where the analogs come in. If we lose the 100-day SMA, and especially the key support at $671 on SPY, that would be an early warning sign that this analog is breaking down and something more bearish is underway.

For this move to continue and for the 1999 analog to play out, we’ll need participation from the Trillion Dollar Titans. If we can see strength hold through earnings and our key market players hold support and continue higher, I don’t see a reason why we can’t push higher.

As long as we’re holding key levels and not seeing aggressive gaps below the 100-day or 200-day SMA, the path of least resistance remains higher. However, if we do break support, see a key reversal signal, or something more concerning, I will pivot and shift my view based on what price is telling me, just as I did during this bounce. Until that time, let’s party like it’s 1999!

SPY Daily Chart