Admittedly, the decline over the last four days has been sharper than expected for a mere pullback. This decline started right after Monday's gap open around 137. On a high to low basis, the ETF moved from 137 to 133 in just four days (almost 3%). And now for the big test. A strong breakout should hold. A weak one will fold. With SPY moving into the zone on Thursday, the big test is at hand and the employment report could tip the balance on Friday morning. Just to keep everyone guessing, SPY formed a spinning top on Thursday. These candlesticks show indecision that can sometimes foreshadow a short-term reversal.
On the 60-minute chart, SPY has now retraced around 50% of the prior advance. The decline to the broken resistance zone remains as a falling flag of sorts. The range widened over the last two days. A short-term resistance level was established with a reaction high on Thursday at noon. A move above this high would break flag resistance and signal a continuation higher. Failure to firm soon could have bigger consequences for the market.
Key Economic Reports/Events:
Fri - May 06 - 08:30 - Employment Report
Fri - May 06 - 15:00 - Consumer Credit
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.
Key Economic Reports/Events:
Fri - May 06 - 08:30 - Employment Report
Fri - May 06 - 15:00 - Consumer Credit
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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