Art's Charts

SPY Surges off Support as RSI Breaks Consolidation

Arthur Hill

Arthur Hill

Chief Technical Strategist, TrendInvestorPro.com

The bulls are simply not to be denied. Despite a gap down and sharp decline last week as well as a bearish engulfing on Monday, stocks firmed above last week's low and SPY surged above 133 on Thursday. This is why I look at an array of indicators to assess the short-term trend. While short-term Nasdaq breadth turned bearish, NYSE breadth remained bullish. Short-term breadth turns bearish when the 10-day SMAs for Net Advances and Net Advancing Volume move below -100. Even though RSI broke below support at 40, SPY was entitled to a correction and never came close to key support, which WAS marked in the 127.5 area. While indicators can be helpful, I would trade all indicators for a simple bar chart because price action is the ultimate arbiter. With two bounces of the 130 area, I can now raise key short-term support to this level. In fact, this bounce looks impressive enough to qualify this zone as medium-term support as well.

110304spyi


110304spyd

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.
Arthur Hill
About the author: , 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