There is no change on the daily chart as SPY stalls just below its big resistance zone. On a closing basis, there have been three moves in excess of 6% over the last 26 days (blue arrows). First, SPY bottomed on June 7th and advanced 6.4% in nine days. Second, the ETF peaked on June 18th and fell 8.5% in ten days. Most recently, SPY bottomed on July 2nd and surged 7.29% the last seven days. Despite the most recent surge, the trend on the daily chart remains down as SPY trades within a falling wedge. The ETF has a series of lower lows and lower highs since April. With Tuesday's gap/surge, the ETF hit the lower end of its resistance zone and the wedge trendline. In addition, RSI moved further into the 50-60 zone, which acts as resistance in a downtrend, provided the trend remains down. The downtrend is at its moment-of-truth. It is time to fail at resistance or continue higher and break resistance.
On the 60-minute chart, SPY gapped up on Tuesday and consolidated after the gap. A small trading range formed with support at 108.86 and resistance at 110.09. Early birds and top pickers are watching for a range break to trigger the next signal. A break below 108.8 would be negative and push SPY back into the gap zone. Key support remains in the 107-108 area. A move below 107 would fully reverse the short-term uptrend. The pink lines show Andrew's Pitchfork. I rarely use it because it is often too steep or not steep enough. The current pitchfork extending up from the July low looks just right. In fact, it confirms support in the 107-108 area. In the indicator window, RSI moved back below 70, but remains within its bull range (40-80). Look for a break below 40 to turn short-term momentum bearish.
Key Economic Reports:
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: ABT, BOOM, BTU, GYMB, HAS, MMM, ROST, VZ
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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