- Oversold and at the 200-day.
- Pennant Evolves into Wedge.
- SOXX and Semis Hit Support.
- A Correction within Uptrend for PALL.
... Oversold and at the 200-day
... The S&P 500 and S&P 500 SPDR (SPY) are at interesting junctures because both are oversold and both are at their 200-day SMAs. In addition, we are at the turn of the month, which covers the last four days of this month and the first four days of June. Over the last twenty years, the S&P 500 has closed higher 65% of the time during this eight month stretch at the turn of the month. The combination of oversold conditions, support and the turn-of-the-month could produce an oversold bounce. You can read more about the turn-of-the-month in this SystemTrader article.
The chart below shows SPY falling around 5% over the last 21 days and three oversold indicators. RSI(5) is below 30 for the third time this month, the S&P 500 %Above 20-day EMA (!GT20SPX) is below 30% for the second time and the Stochastic Oscillator is below 20 for the first time this month. All three indicators are oversold as SPY trades near the 200-day SMA and the late March low.
Pennant Evolves into Wedge
It is important for chartist to re-evaluate their charts along with new price data. I wrote about the pennant break and walk down the lower Bollinger Band yesterday, but we may see a short-term bounce within this downtrend. As such, I removed the pennant and re-drew the blue lines to mark a possible falling wedge, which defines this short-term downtrend. Falling wedges are typically corrective patterns that mark a pullback within a bigger uptrend. The upper line and last week's gap mark short-term resistance going forward, and a breakout here would reverse the short-term downtrend.
SOXX and Semis Hit Support
Even the lowly Semiconductor iShares (SOXX) and some key components are oversold and near potential reversal zones. SOXX is near broken resistance, the 200-day SMA, the mid March low and the 50-62% retracement zone. The ETF is also oversold with RSI(10) below 30 and the Stochastic Oscillator below 20. SOXX is also down over 15% from its May high and looks ripe for at least an oversold bounce.
A Correction within Uptrend for PALL
Palladium fell on hard times with a sharp decline in March and further weakness into early May, but this decline looks like a correction within a bigger uptrend. The chart below shows weekly prices with the Palladium Continuous Futures ($PALL) in the upper window and the Palladium ETF (PALL) in the lower window. Both hit new highs in March and both remain above their rising 40-week SMAs. The decline over the last several weeks looks like a falling wedge and a breakout would be bullish. The second chart shows PALL breaking the wedge line with a 2% move in early trading on Thursday.
On Trend on Youtube (Thursday, 30-May)
I covered these charts and more in On Trend and the recording is now available on Youtube.
- SPY: Oversold at 200-day SMA
- New Lows Expand (Indexes and Sectors)
- Several Semis are Oversold at Support
- A New Play on Palladium?
- Click here to Watch.
Arthur Hill, CMT
Senior Technical Analyst, StockCharts.com
Author, Define the Trend and Trade the Trend
Want to stay up to date with the latest market insights from Arthur?
– Follow @ArthurHill on Twitter
– Subscribe to Art's Charts
– Watch On Trend on StockCharts TV (Tuesdays / Thursdays at 10:30am ET)
