With a three day bounce last week, the S&P 500 ETF (SPY) is poised to challenge the upper trendline of the falling flag/wedge. The ETF opened strong on Friday and then stalled the rest of the day to form a doji type candlestick denoting indecision. A little stalling on the Friday before a 3-day weekend is normal. Note that this stall comes just below the wedge trendline. A move above 134 would break this trendline and further strength above 135 would break the mid May reaction high. Such a 1-2 combo would reverse the four week downtrend and call for a resumption of the bigger uptrend.
Momentum continues to improve with StochRSI breaking above its May highs. As noted last week, trend reversals come in stages. The doji and piercing pattern marked the bottom picking stage early last week. Follow through above 132.8 marked the early-bird breakout stage on Thursday. We now have a small momentum breakout with StochRSI on Friday.
On the 60-minute chart, SPY is trading just below a resistance zone marked by the May trendline and the mid May reaction high near 135. RSI is also near bear zone resistance at 65. A break above these resistance levels would fully reverse the short-term downtrend. Looking shorter-term, I think it is important that Thursday's mini-breakout holds. A move below 132.5 would make for a failed breakout and put the bears back in the driver's seat.
As shown on the table below, it is a big week on the economic front. There are four key economic reports: Chicago PMI, ISM Manufacturing, ISM Services and Factory Orders. There are also three employment related reports: Challenger, ADP and Non-Farm Payrolls. While the biggie is non-farm payrolls on Friday, the market is very likely to make its move ahead of this report.
Key Economic Reports/Events:
Tue - May 31 - 09:00 - Case-Shiller Housing Index
Tue - May 31 - 09:45 - Chicago PMI
Tue - May 31 - 10:00 - Consumer Confidence
Wed - Jun 01 - 07:30 - Challenger Job Report
Wed - Jun 01 - 08:15 - ADP Employment Report
Wed - Jun 01 - 10:00 - ISM Manufacturing Index
Wed - Jun 01 - 10:00 - Construction Spending
Wed - Jun 01 - 15:00 – Auto/Truck Sales
Thu - Jun 02 - 08:30 - Jobless Claims
Thu - Jun 02 - 10:00 - Factory Orders
Thu - Jun 02 - 11:00 - Oil Inventories
Fri - Jun 03 - 08:30 – Employment Report
Fri - Jun 03 - 10:00 - ISM Services Index
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.
On the 60-minute chart, SPY is trading just below a resistance zone marked by the May trendline and the mid May reaction high near 135. RSI is also near bear zone resistance at 65. A break above these resistance levels would fully reverse the short-term downtrend. Looking shorter-term, I think it is important that Thursday's mini-breakout holds. A move below 132.5 would make for a failed breakout and put the bears back in the driver's seat.
As shown on the table below, it is a big week on the economic front. There are four key economic reports: Chicago PMI, ISM Manufacturing, ISM Services and Factory Orders. There are also three employment related reports: Challenger, ADP and Non-Farm Payrolls. While the biggie is non-farm payrolls on Friday, the market is very likely to make its move ahead of this report.
Key Economic Reports/Events:
Tue - May 31 - 09:00 - Case-Shiller Housing Index
Tue - May 31 - 09:45 - Chicago PMI
Tue - May 31 - 10:00 - Consumer Confidence
Wed - Jun 01 - 07:30 - Challenger Job Report
Wed - Jun 01 - 08:15 - ADP Employment Report
Wed - Jun 01 - 10:00 - ISM Manufacturing Index
Wed - Jun 01 - 10:00 - Construction Spending
Wed - Jun 01 - 15:00 – Auto/Truck Sales
Thu - Jun 02 - 08:30 - Jobless Claims
Thu - Jun 02 - 10:00 - Factory Orders
Thu - Jun 02 - 11:00 - Oil Inventories
Fri - Jun 03 - 08:30 – Employment Report
Fri - Jun 03 - 10:00 - ISM Services Index
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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