We're short term traders but sometimes we like to indulge in thoughts about the intermediate time-frame. Warning: this is what we think will happen but we always defer to what we see, not what we think. This means that if we're wrong we are not the type to press our bets. We take our losses, and re-assess.
The first test against major resistance in overbought market is most often a great daytrading opportunity short. We short the first test of resistance (in overbought markets) and buy the first test of support (in oversold markets) but that's it -- second test we don't touch. Double tops/double bottoms are not worth the risk for our type of trading.
Our guess is that SPY will test 113.2, pull-back and then move higher into a new range. However, we do intend to catch that pullback short before we go long on any swings into the new range. We're fast, and that type of trading is what we're all about.
Why do we think that SPY will enter a new range higher? Because our belief is that bonds will finally break this trend-line lower and end their long rally.
Another piece of the puzzle is that copper refused to sell-off even in the dire dark months of the August pull-back. As we wrote a few weeks ago, copper basically told everyone that the pull-back was a farce.