There is no change on the daily chart. SPY remains in a downtrend overall and is currently trading near the middle of its seven week range (113-101). A falling wedge defines the overall downtrend with a resistance zone around 110-113 from the June highs. Even though last week's surge looks strong and there were two follow through days, it is still contained within the falling wedge and SPY remains well below its prior high. RSI is nearing its resistance zone in the 50-60 area. This zone acts as resistance during a downtrend. Strong follow through and an RSI break above 60 would call for a re-evaluation of the medium-term downtrend.
SPY is nearing its moment-of-truth on the 60-minute chart. The short-term trend is clearly up, but the ETF is trading in the 50-62% retracement zone. In addition, there is potential resistance in the 107-109 area from the late June consolidation (orange oval). Even though there are currently no signs of weakness, this is a potential reversal zone to watch. A small flag or wedge pullback would be short-term bullish and improve the reward-to-risk ratio for long positions. Broken resistance turns into potential support around 104-105. RSI has been overbought for three days. This momentum indicator was overbought for a week in mid June and can remain overbought.
The week starts slow on the economic front, but kicks into high gear Wednesday, Thursday and Friday. Retail sales on Wednesday is the biggie here. We will get a little preview with Goldman Store Sales on Tuesday. Retail sales drive some 2/3 of GDP and the consumer discretionary sector has been relatively weak since mid June. The bond market will be watching the Fed minutes on Wednesday and the inflation related reports (PPI and CPI). The week ends with another measure of consumer health with Michigan sentiment on Friday morning.
Key Economic Reports:
Tue - Jul 13 - 07:45 - Goldman Store Sales
Wed - Jul 14 - 08:30 - Retail Sales
Wed - Jul 14 - 10:00 - Business Inventories
Wed - Jul 14 - 10:30 - Crude Inventories
Wed - Jul 14 - 14:00 - Minutes of FOMC Meeting
Thu - Jul 15 - 08:30 - Initial Claims
Thu - Jul 15 - 08:30 - PPI
Thu - Jul 15 - 09:15 - Industrial Production
Thu - Jul 15 - 09:15 - Capacity Utilization
Fri - Jul 16 - 08:30 - CPI
Fri - Jul 16 - 09:55 - Mich Sentiment
Charts of Interest: ADM, ADSK, BIG, GME, MMC, Q
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise). We all need to think for ourselves when it comes to trading our own accounts. First, it is the only way to really learn. Second, we are the only ones responsible for our decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. Among other things, this includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.
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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