With a little firmness on Wednesday, we can draw a tentative trendline extending up from last week's low to form a volatile triangle over the last 8 trading days. Technically, the short-term trend is still up. SPY had a huge run the first three weeks of February and some sort of pullback or corrective process is normal. Despite last week's gap down and this week's lower high, SPY remains above a clear support zone around 129.5-130.5. This zone is based on the lows of the last two weeks. A break below this zone would forge a lower low and signal the start of a short-term downtrend. For now, the ETF is consolidating around 131 (blue oval). A break above the consolidation highs would provide the first sign that SPY is bouncing off support in anticipation of a positive employment report on Friday. We can also see that RSI is coiling up with a lower high last week and a higher low this week. A break above 60 or below 40 would trigger the next momentum signal.
Key Economic Reports/Events:
Thu - Mar 03 - 08:30 - Initial Claims
Thu - Mar 03 - 08:30 - Continuing Claims
Thu - Mar 03 - 10:00 - ISM Services
Fri - Mar 04 - 08:30 - Nonfarm Payrolls
Fri - Mar 04 - 10:00 - Factory Orders
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.
