What Releases the Pressure? SPY Is Poised to Break| Elliott Wave S&P500 VIX Technical Analysis
Rob Roy presents a technical market analysis of SPY and various asset classes using Elliott Wave theory, highlighting multiple descending and consolidation triangles that suggest imminent breakouts across equities, bonds, energy, metals, and cryptocurrencies. He emphasizes that the Fed's 25 basis point rate hike was offset by liquidity injections, and discusses key support/resistance levels across major indices and individual stocks.
Summary
Rob Roy opens the LAW Wave Options market update by analyzing the S&P 500 (SPY), which has formed a descending triangle after breaking out from a symmetrical pattern. The 50-day moving average has converged at the crucial 760 support level, with a 20-point range (760-780) expected before a directional breakout. Roy notes that while Wednesday's Fed day suggested a potential breakdown, Thursday's recovery exemplified the typical "Fed fade trade," and the market closed Friday just above 760. He explains that Elliott Wave triangles take precedence over wave patterns, so the direction is unpredictable but a move is imminent, with targets around 800 if moving higher or testing the triangle point if moving lower.
Regarding bonds, Roy examines TLT (20-year Treasury) and TNX (10-year rates). TLT prices moved up through Fed day as yields fell, but gave back gains Friday. He discusses a wave five extension at 111.12% and questions whether the bond market may be oversold. TNX shows a wave five extended 207%, with the 10-year rate having broken above 5%. SHY (1-3 year rates) broke below a channel established since April, suggesting higher short-term rates, though Roy notes this occurred on triple-witching day and may reverse.
Macro charts show the blend of four market phases remain green (expansion dominant), though there's slight separation between the expansion and contraction lines. The Fed liquidity chart reveals an injection of liquidity this week, which Roy suggests counterbalances some impact of the rate hike. Global macro phases look "pretty ugly" due to spiking oil prices, creating separation between global and S&P performance.
The dollar is forming an ascending triangle and must break one direction, complicating the outlook: higher dollar values hurt international company earnings, while excessively weak dollars risk foreign dollar holders dumping reserves. Roy prefers the recent "Goldilocks" trading channel but expects an imminent breakout.
Energy markets show USO (crude oil) with a wave three labeled, having hit exactly the 100% extension predicted by triangle measurements and reaching the 155 level. Roy expresses concern that oil may push even higher toward the 175 level previously forecasted for wave five. UNNG (natural gas) forms a triangle after a July zigzag breakdown, with questions about where natural gas finds bids amid high supply.
Metals show GLD (gold) with a descending triangle, lower highs around 400 support, and potential breakouts toward 425 (up) or 375 (down). SLV (silver) shows looser consolidation with higher lows and lower highs. Roy mentions a large bullish options trade on gold, suggesting traders believe bond market oversold conditions may lead to rate declines, benefiting gold.
In crypto, BITB (Bitcoin) enjoyed a strong day despite rate hikes, potentially due to liquidity injections rather than the postponed Clarity Act. It approaches 45 resistance after holding 41-42. Ethereum similarly moved higher, counterintuitively to rising rates.
For U.S. equity indices, DIA (Dow) is "in real danger," having broken below 520 support and the 50-day moving average with a bearish 10/30-day crossover. Roy considers wave 4 at 38.2% as potential support. QQQ (Nasdaq-100) remains in a 700-750 trading range, best traded sideways via strategies like iron condors. IWM (small caps) finally broke below 290 after surprisingly resilient performance, with next target at 270 (previous wave four).
Individual stock analysis includes Tesla at crucial 375 resistance (former support), with breaks below 350 potentially leading lower. SpaceX attempts to break 150 resistance, potentially targeting 175. Nvidia held 210 and moves toward 230 with potential further extension to 245. Amazon must hold 250 with no resistance below until 230. Apple trends upward at 45 degrees above the 10-day moving average, facing prior wave five resistance but positioned for further gains. Netflix gap-downed on a downgrade with wave four at exactly 70% (marginally above the Elliott Wave minimum), potentially testing 66 before bouncing or going to 62. Semiconductors (SOX) show higher lows and lower highs without perfect triangle formation, with Micron needing to break August-September double tops around 1040 to target June highs. Microsoft consolidated after a vertical move, sitting at the midpoint of a crude consolidation triangle.
Roy concludes that breakouts are imminent across multiple timeframes and asset classes, ending the months-long sideways consolidation patterns.
About this episode
Elliott wave patterns across the US markets are pointing to something we haven’t seen much of lately — the potential for some meaningful directional breakouts after months of consolidation. The SPY is sitting inside a descending triangle, with support around 760 and a clear pattern of lower highs. The 50-day moving average has now caught up with that support level, while the 10- and 30-day averages are converging nearby. That tells me we’re getting very close to a decision point. A break could target roughly 20 points in either direction, with the Elliott wave projection still leaving open the possibility of a move toward 800 if the market breaks higher. The important thing right now isn’t trying to predict the direction — it’s recognizing that the market is running out of room. :: How to Subscribe to TRADEFINDER LIVE! for Free :: ------------------------------------------------------------------------------------ Become a FREE Tradefinder Member using the link below. As a subscriber you’ll watch live as Rob finds new trading opportunities each week. ► Registration Link: https://ewotrader.com/tradefinder/ :: Subscribe to the HUBB Channel for Live Updates and Q&A :: --------------------------------------------------------------------------------------------------- To participate in Q&A with Rob Roy, join us at the HUBB YouTube channel. Click the link below now to subscribe for free. ► Registration Link: https://www.youtube.com/channel/UCw4SxOmqzUx1TK0DajR92Jw?sub_confirmation=1 :: Sections in this Video :: ------------------------------------------------------------------------------------ 00:00 - Introduction 00:22 - SPY 02:43 - Top Shot Weekly AI Option Trade Alerts 03:17 - TLT 05:05 - TNX 06:05 - SHY 07:02 - SPX & Macro Phases 08:00 - SPX & Fed Liquidity 09:10 - SPX & Financial Conditions 09:37 - US Dollar 11:14 - USO 12:45 - UNG 13:59 - GLD 15:04 - SLV 15:45 - BITB 16:39 - ETHW 17:05 - DIA 17:44 - QQQ 18:21 - IWM 19:25 - TSLA 21:07 - SPCX 21:45 - NVDA 22:31 - AMZN 23:15 - AAPL 24:15 - NFLX 25:25 - SOXX 26:18 - MU 27:00 - MSFT :: To receive TRADE ALERTS for our strategies see links below :: ------------------------------------------------------------------------------------------------ ► EWO Volatility Strategy https://ewotrader.com/the-volatility-strategy/ ► EWO Impulse Strategy https://ewotrader.com/the-impulse-strategy/ ► EWO Time Strategy https://ewotrader.com/the-time-strategy/ :: Other Links to Follow Us:: -------------------------------------------- ► Instagram: http://www.instagram.com/elliottwaveoptions/ ► Facebook: http://www.facebook.com/elliottwaveoptions/ ► LinkedIn: http://www.linkedin.com/company/elliott-wave-options/ ► Twitter: http://www.twitter.com/ewotrader ► Website: http://www.ewotrader.com The bond market is adding another interesting piece to the puzzle. Following the Fed’s 25-basis-point rate increase, longer-duration bonds initially rallied and yields moved lower before giving some of that back. The 10-year yield has now pushed above 5%, but it’s also become quite extended. If bonds can find some footing and yields begin to ease, that could provide some welcome support for equities. Our macro indicators remain slightly more constructive. Expansion is still ahead of contraction, and the Fed injected liquidity again this week. That liquidity may have helped offset some of the pressure from higher rates. Global financial conditions, however, remain considerably weaker, with rising oil prices playing an important role. The US dollar is another market to watch closely. It’s forming an ascending triangle and appears close to a significant breakout. Oil also remains a concern after completing several of the technical targets we’ve been following and potentially setting up for another leg higher. And triangles seem to be everywhere. Natural gas, gold, semiconductors and several other markets are consolidating near important levels. Even where the formations aren’t textbook perfect, we’re repeatedly seeing higher lows, lower highs and narrowing ranges. After the sideways trading we’ve experienced over the past few months, that suggests volatility and directional opportunity could be returning. There are also some very important individual levels to watch. Tesla is testing resistance around 375, while Nvidia has held 210 and is pushing back toward 230. Amazon needs to hold 250, Apple continues to trend higher, and Netflix has returned to an area that could attract buyers after its recent decline. Semiconductors are consolidating as well, with Nvidia and Micron showing renewed strength, while Microsoft continues to digest its earlier vertical move through a lengthy sideways range. Put it all together and the message is pretty clear: markets across multiple asset classes are compressing around major technical levels. We don’t know which direction every breakout will take — but after months of sideways action, it certainly looks like the market is getting ready to move.
Key Insights
- The Federal Reserve's 25 basis point rate hike was counterbalanced by a liquidity injection into the market, which Roy interprets as the Fed managing both tightening and market support simultaneously, making the net effect unclear for equities.
- Elliott Wave theory establishes that triangles override all other wave pattern analysis—traders should ignore wave five counts and focus exclusively on triangle breakout direction because triangles take precedence in Elliott's rules.
- The 'Fed fade trade' is a consistent market pattern where whatever price action occurs on Federal Reserve announcement days gets reversed the next day, as demonstrated by Wednesday's breakdown being followed by Thursday's recovery above 760.
- A large bullish options trade on gold suggests sophisticated traders believe the bond market is oversold and that interest rates may decline, which would support gold prices despite the conventional wisdom that rate hikes hurt gold.
- Across SPY, QQQ, IWM, SOX, individual stocks, bonds, energy, metals, and crypto, triangle formations and consolidation patterns are forming simultaneously, indicating a market-wide setup for significant directional moves after months of sideways trading.
Topics
Transcript
[0:06] Hi everyone, this is Rob Roy and welcome to the LAW Wave Options US market update. As we do each and every week, we show you on the screen the stocks that'll be featured in this recording. And as a quick reminder, if there's a particular stock you're interested in, you go directly to it using the chapters feature in this recording. All right, let's take a look at the chart of the spy. Pretty interesting chart. Uh, lots to talk about with what's going on in the market. So, we'll sprinkle that out as we move through. Everybody knows that the Fed raised 25 basis points this week, but look at the pattern here. So, we had the…
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