There is still no change on the daily chart. SPY continues to stall around 114-115 and has yet to break support. Even though the trend is clearly up here, I am leaving the ABC correction possibility on the chart. SPY is also near channel resistance and overbought. The upper trendline of the channel was drawn parallel to the lower trendline and its extension marks potential resistance around 115. CCI remains in the indicator window. Notice that CCI dipped below 100 at the end of July and then moved back above in early August. A little reaction low established momentum support at 50. The break below this low in early August coincided with the August decline. A similar low formed in CCI this week. A move below 112 in the ETF and 50 in CCI could be used as a bearish trigger on the daily chart.
On the 60-minute chart, SPY broke above neckline resistance of a small inverse head-and-shoulders pattern, but failed to hold the breakout as selling pressure drove the index back below 115. Even though the inability to hold the breakout is negative, the ETF remains above key support and has yet to fully reverse the short-term uptrend. The gap from 24-Sept is still holding. Support in the 113-114 area is further confirmed by Tuesday's reaction low and the small bounce on Thursday. RSI is also testing support in the 40-50 zone. There was one brief dip below 40 on 23-Sept, but RSI quickly recovered and this support break was never confirmed by a support break in SPY. The song remains the same. Look for RSI to break 40 and SPY to break 113 for a short-term trend reversal.
It is a pretty big week on the economic front, especially on Friday. A Fed governor speaks on Friday morning and the market gets hit with Michigan sentiment, construction spending and the ISM Index around 10AM.
Key Economic Reports:
Thu - Sep 30 - 08:30 - GDP Estimate
Thu - Sep 30 - 08:30 - Jobless Claims
Thu - Sep 30 - 09:45 - Chicago PMI
Thu - Sep 30 - 16:30 – Fed Balance Sheet
Fri - Oct 01 - 08:30 - Personal Income an Spending
Fri - Oct 01 - 09:55 - Michigan Consumer Sentiment
Fri - Oct 01 - 10:00 - Construction Spending
Fri - Oct 01 - 10:00 - ISM Index
Fri - Oct 01 - 14:00 - Auto Truck Sales
Charts of Interest: Tuesday and Thursday.
-----------------------------------------------------------------------------
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.
