The S&P 500 ETF (SPY) remains in a medium-term uptrend as it approaches the upper trendline of the rising channel. This trendline extends to around 112 this week and SPY could hit this level before starting a downswing. At this point, I consider SPY too strong to entertain bearish thoughts, but also too overextended after a 7.7% advance in 12 days. Short-term, I am watching Monday's gap and the Stochastic Oscillator.
As long as the gap holds and the Stochastic Oscillator remains above 80, SPY is both short-term overbought and strong. A move below the gap zone in SPY and a move below 80 in the Stochastic Oscillator would suggest a pullback within the medium-term uptrend.
On the 30-minute chart, SPY surged above 111 and then consolidated around this level the last two days. CCI surged above +100 and remains in positive territory. A consolidation after an advance is simply a rest that can be considered neutral. Those with a bearish bias may point to lack of follow through, but SPY is clearly strong as long as it holds its gains. There is a support zone around 110 from the gap. This is the first level to watch, but I am setting key short-term support at 109. A move below this level and a CCI break below -100 would reverse the short-term uptrend. Time to sit tight until the next signal.
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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