There is not much change in the short-term or medium-term analysis. Medium-term, the daily chart shows SPY in a clear uptrend with a new 52-week high this week. The ETF is up some 7.6% since December and up 22% since August. These big gains make the ETF overbought by most yardsticks. As we have seen before, overbought is not necessarily bearish. Stocks can become overbought and remain overbought during strong uptrends. SPY was also overbought in mid September (±114), but continued on to 122 by early November. At this point, I will be watching short-term support on the 60-minute chart for signs of a reversal that would indicate a correction within this bigger uptrend.
On the 60-minute chart, SPY remains in a rising price channel with first support at 126. After a gap and breakout to start the year, the ETF reached the upper trendline and pulled back to the breakout. Broken resistance turned into support as SPY bounced back to 127 yesterday afternoon. Trendline support at 126 is the first level to watch. Key support on this 60-minute chart remains at 125. A break below this level and an RSI break below 40 would reverse the short-term uptrend. Because the bigger trend is still up and there is lots of money on the sidelines, corrections could be relatively short lived. Also keep in mind that correction can form as choppy sideways patterns.
Key Economic Reports:
Wed - Jan 05 - 07:00 - MBA Mortgage Purchase Index
Wed - Jan 05 - 08:15 - ADP Employment Change
Wed - Jan 05 - 10:00 - ISM Services
Wed - Jan 05 - 10:30 - Oil Inventories
Thu - Jan 06 - 08:30 - Jobless Claims
Fri - Jan 07 - 08:30 - Nonfarm Payrolls – Employment Report
Fri - Jan 07 - 10:00 – Bernanke Speaks
Charts of Interest: Tuesday and Thursday in separate post.
-----------------------------------------------------------------------------
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.
Key Economic Reports:
Wed - Jan 05 - 07:00 - MBA Mortgage Purchase Index
Wed - Jan 05 - 08:15 - ADP Employment Change
Wed - Jan 05 - 10:00 - ISM Services
Wed - Jan 05 - 10:30 - Oil Inventories
Thu - Jan 06 - 08:30 - Jobless Claims
Fri - Jan 07 - 08:30 - Nonfarm Payrolls – Employment Report
Fri - Jan 07 - 10:00 – Bernanke Speaks
Charts of Interest: Tuesday and Thursday in separate post.
-----------------------------------------------------------------------------
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.
Learn More
