Overall, SPY continues to move higher within a tight rising price channel. Obviously, this channel cannot hold forever. Wednesday's decline (-.98%) was the sharpest 1-day loss since late November, the 26th to be exact. This means we have just witnessed the most selling pressure in 37 trading days. One day does not a trend change make. The ETF remains within the channel. Even a channel break would argue for a pullback within a bigger uptrend. On the daily chart, broken resistance turns into the first support zone to watch around 122. Momentum on the daily chart would not turn bearish unless CCI moves into negative territory. CCI is still above 100.
On the 60-minute chart, SPY is testing the lower trendline of the rising price channel and RSI is testing its support zone (40-50). These levels held at least three times since mid December. A break below 127.7 on the price chart and 40 in RSI would signal the most selling pressure since the rally began in early December. While it is tempting to turn short-term bearish on further weakness, I am also waiting for confirmation from short-term breadth indicators.
The next two charts show the 10-day SMA for NYSE Net Advancing Volume ($NYUD) and Nasdaq Net Advancing Volume ($NAUD). These indicators turn bullish with move above +100 and remain bullish until a move below -100. Such signals will not catch exact tops and bottoms. Instead, these signals are designed to identify enough selling pressure to warrant a significant change in breadth, not a one or two day blip. The 10-day SMA of NYSE Net Advancing Volume moved below +100, but the 10-day SMA for Nasdaq Net Advancing Volume remains well above +100. Neither has triggered a bearish signal and it will take a few more days of selling pressure to turn both bearish.
Key Economic Reports:
Thu - Jan 20 - 08:30 - Initial Claims
Thu - Jan 20 - 10:00 - Existing Home Sales
Thu - Jan 20 - 10:00 - Leading Indicators
Thu - Jan 20 - 10:00 - Philadelphia Fed
Thu - Jan 20 - 11:00 - Crude Inventories
Charts of Interest: Tuesday and Thursday in separate post.
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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.
The next two charts show the 10-day SMA for NYSE Net Advancing Volume ($NYUD) and Nasdaq Net Advancing Volume ($NAUD). These indicators turn bullish with move above +100 and remain bullish until a move below -100. Such signals will not catch exact tops and bottoms. Instead, these signals are designed to identify enough selling pressure to warrant a significant change in breadth, not a one or two day blip. The 10-day SMA of NYSE Net Advancing Volume moved below +100, but the 10-day SMA for Nasdaq Net Advancing Volume remains well above +100. Neither has triggered a bearish signal and it will take a few more days of selling pressure to turn both bearish.
Key Economic Reports:
Thu - Jan 20 - 08:30 - Initial Claims
Thu - Jan 20 - 10:00 - Existing Home Sales
Thu - Jan 20 - 10:00 - Leading Indicators
Thu - Jan 20 - 10:00 - Philadelphia Fed
Thu - Jan 20 - 11:00 - Crude Inventories
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.
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