When it rains, it pours. Stocks were hovering in positive territory on Tuesday afternoon, but got hit with selling pressure in the final hour. Blame is on the economic outlook from Bernanke. After edging above 130 just after 3PM, the S&P 500 ETF (SPY) plunged and closed below 129. The market has been seriously rattled over the last 1-2 weeks and remains very jittery. It will likely take some time to heal these wounds. This means trading could be choppy for 1-2 weeks before the market gets another directional move. On the price chart, SPY has closed near the day's low four of the last five days. With another failed rally, we can mark first resistance at Monday's high. A move above this level could lead to an oversold bounce. The next resistance is around 132. This level stems from broken support and the May trendline. Notice that I drew through the 135 spike because it looks like a little irrational exuberance. The 60-minute chart expands these resistance levels.
Key Economic Reports/Events:
Wed - Jun 08 - 07:00 - MBA Mortgage Index
Wed - Jun 08 - 10:30 - Oil Inventories
Wed - Jun 08 - 14:00 - Fed's Beige Book
Thu - Jun 09 - 08:30 - Jobless Claims
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.
