SPDR S&P 500 ETF Trust (SPY): Where Is the Market Heading?

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Despite all the negative headlines about stocks that I read in the financial media in recent days, the benchmark S&P 500 — as represented by the popular SPDR S&P 500 ETF Trust (NYSEARCA:SPY) — since early March has “only” pulled back around 3%.

Beat the Bell: SPDR S&P 500 ETF Trust (NYSEARCA:SPY)Any seasoned stock market operator will tell you that a 3% pullback can turn into a 5% or even 10% correction just as quickly as it can lead to a renewed rally.

That’s why every investor should be watching the current technical juncture in the SPY ETF for perspective — and of course, to determine the likely path of least resistance going forward.

When I last mused about the S&P 500 and the SPY on Jan. 5, I offered that a gravitation higher into the second half of the month and toward the $230-$231 area could take place rather quickly. That ended up occurring. While stocks ultimately continued to rally right into early March, they since pulled back a little to a curious area on the charts.

One of my old mentors at JPMorgan used to remind me that a little perspective on the markets goes a long way. To wit, a quick glance at the multiyear weekly chart of the SPY ETF does just that.

SPY ETF Charts

First, we’ll look at the multiyear weekly chart.

SPY ETF chart weekly view
Click to Enlarge

Note that the uptrend since 2009 in the SPY has largely remained intact. Also, as a result of the most recent multimonth rally, the index has once again arrived at the upper end of this longer-standing channel that I marked with the two blue arrow lines.

Also note that upside momentum, as represented by the MACD oscillator at the bottom of the chart, is in overbought territory.

None of this means the rally is over, but it does likely mean that upside momentum such as we have seen since last November likely won’t resume anytime soon.

On the daily chart, we see that the 3% pullback over the past few weeks now has the SPY ETF retesting both its 50-day simple moving average as well as the black diagonal line that formerly acted as resistance.

SPY ETF chart daily view
Click to Enlarge

The bears, however, will point out that the November uptrending channel — as marked by the purple-dotted parallels as a result of this past Tuesday’s one-day selloff — has now broken.

So, what will it be? Will this area of support near $233-$234 hold as support or is a deeper pullback needed?

Considering that price is the only arbiter, a bullish reversal that has the SPY push back above $235 on a daily closing  basis at the very least is now needed to confirm better odds of a renewed push higher.

A break and hold below $233 could open downside toward $227 as a next downside target.

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Article printed from InvestorPlace Media, https://investorplace.com/2017/03/spdr-sp-500-etf-trust-spy-where-is-the-market-heading/.

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