SPY Pullback and Go? - November 28, 2025 #shorts

Key Concepts

• Failed Breakout: A situation where an asset's price attempts to move above a resistance level but fails to sustain the move, often leading to a reversal.
• Rising 20-day Moving Average: A technical indicator that shows the average closing price of an asset over the past 20 days, with the average trending upwards, suggesting bullish momentum.
• Inverted Head and Shoulders Pattern: A bullish reversal pattern in technical analysis characterized by three troughs, with the middle trough (the "head") being the lowest, and the two outer troughs (the "shoulders") being shallower. It signals a potential shift from a downtrend to an uptrend.
• Higher High and Higher Low: Indicators of an uptrend, where each successive price peak is higher than the previous one, and each successive price trough is higher than the previous one.
• Low-Risk, High-Probability Entry: A trading strategy focused on identifying entry points for trades that have a high likelihood of success and a limited potential for loss.

Market Analysis and Trading Scenarios

The discussion focuses on potential scenarios for the S&P 500, emphasizing a preference for a "failed breakout" over a direct, strong rally past the current peak.

Scenario 1: Failed Breakout and Higher Low

• Current Situation: The market has moved from approximately 650 to 690-685, indicating an extended move. A direct break past the current peak is viewed with caution.
• Desired Outcome: A "failed breakout" at the current resistance level is considered a more favorable scenario. This would involve a brief attempt to move higher, followed by a pullback.
• Technical Indicators: The ideal pullback would be to the "rising 20-day moving average," which is also noted to be near the "5-day moving average."
• Confirmation of Uptrend: During this pullback, the market should find buyers at the rising 20-day moving average, and importantly, move back above the "50-day moving average." This would establish a "higher low."
• Inverted Head and Shoulders Formation: This sequence of a higher high (implied by the initial rally) followed by a higher low would complete the "inverted head and shoulders pattern." The speaker notes that this pattern is typically recognized after it has formed.
• Trading Strategy: The speaker suggests that buying becomes more attractive "as the strength emerges" during this phase, rather than trying to buy at the absolute peak of the initial rally.

Scenario 2: Direct Rally (Less Preferred)

• Observation: An early next week rally could potentially break past the current peak.
• Concern: This move is considered "extended" given the prior grind from 650 to 690.

Preferred Entry Strategy

• Focus: The overarching goal is to identify "low-risk, high-probability entries."
• Methodology: When the market pulls back to the 5-day and 20-day moving averages, traders should look for specific stocks that present these favorable entry conditions.

Key Arguments and Perspectives

• Preference for Pullbacks: The speaker strongly advocates for a pullback to a rising moving average as a more opportune time to enter long positions, rather than chasing a rapid ascent. This is framed as a more "tradable" scenario for the long side.
• Pattern Recognition: The inverted head and shoulders pattern is discussed as a significant bullish signal, but the speaker implies that buying before the pattern is fully confirmed, as strength emerges, is a more strategic approach.
• Risk Management: The emphasis on "low-risk, high-probability entries" underscores a commitment to disciplined trading and capital preservation.

Notable Statements

• "Well, if it breaks past there, you've got to remember we've just ground from uh 650 to 690 to get there 685. It's extended at that point if it breaks beyond this little high."
• "We'd love I'd love to see a failed breakout at this point. Not that it's going to fail altogether, but then we could come down like this, find buyers at that now rising 20-day moving average, and we're back above the 50."
• "So, we would pull back, create a higher low, and then what? Then everyone's going to start talking about the inverted head and shoulders pattern."
• "But I'm going to tell you, you're much better off buying over here as the strength emerges."
• "And that's what we're looking for is low-risk high probability entries."

Technical Terms and Concepts Explained

• Moving Average (5-day, 20-day, 50-day): A technical indicator that smooths out price data by creating a constantly updated average price. Shorter-term moving averages (like 5-day) react more quickly to price changes, while longer-term ones (like 50-day) are slower but indicate longer-term trends.
• Peak/High: The highest price an asset reaches within a specific period, often acting as a resistance level.
• Breakdown/Breakout: A price movement that decisively moves below a support level (breakdown) or above a resistance level (breakout).
• Failed Breakdown/Breakout: A price movement that attempts to break a support or resistance level but fails to sustain the move, often leading to a reversal in the opposite direction.
• Higher Low: A price trough that is higher than the previous price trough, indicating an uptrend.
• Higher High: A price peak that is higher than the previous price peak, also indicating an uptrend.

Logical Connections

The discussion logically progresses from analyzing the current market state (extended rally) to proposing a preferred scenario (failed breakout leading to a higher low). This preferred scenario is then linked to the formation of a bullish technical pattern (inverted head and shoulders) and a specific trading strategy (buying on strength emerging from a pullback). The ultimate goal of this strategy is to achieve "low-risk, high-probability entries."

Data, Research Findings, or Statistics

• Price Levels: 650, 690, 685 are mentioned as specific price points in the S&P 500's recent movement.

Synthesis/Conclusion

The core takeaway is a strategic approach to trading the S&P 500, favoring a scenario where a brief failed breakout leads to a pullback to the rising 20-day moving average. This pullback, if it finds buyers and allows the price to move back above the 50-day moving average, would establish a higher low, completing a bullish inverted head and shoulders pattern. The speaker emphasizes that buying as strength emerges during this phase, rather than chasing an immediate breakout, offers a more favorable risk-reward profile, aiming for low-risk, high-probability entries. This scenario is presented as a potential path towards a strong close for the year.