On the daily chart, SPY surged to resistance around 111 and then consolidated the last few days. The ETF appeared headed down after a sharp decline on Tuesday and weak open on Thursday, but recovered on Thursday afternoon and closed strong. This long-red-hollow candlestick represents a reversal day. Follow through with a break above resistance would open to the door to the January highs. Also notice that the ETF is right at the potential trendline for the developing price channel. Obviously, further upside would cancel out this channel. RSI is still stalling in the 50-60 zone, which acts as resistance in a downtrend. Keep in mind that this zone does NOT act as resistance in an uptrend. A break above 60 would be positive for momentum.
On the 60-minute chart, SPY edged above flag resistance and RSI edged above 60. Even though SPY fell back below 111 and RSI fell back below 60, the makings of a short-term breakout are there. There are two parts to the current flag setup. First, there is the advance from 105 to 111.5. This includes a sharp surge from 107 to 111.5. Second, there is the pullback to 109. This includes a 38% retracement and recovery after Thursday's gap down. 38% is about the minimum retracement expected after an advance. The gap recovery is impressive and SPY is showing signs of strength with the flag breakout.
The economic calendar is pretty heavy this week so we could see some above average volatility. The week ends with the monthly employment report on Friday morning. We will get a employment previews with the ADP report on Wednesday and Initial Claims on Thursday.
Tuesday-10:00 ISM Index
Wednesday-08:15 ADP Employment
Wednesday-10:00 ISM Services
Wednesday-10:30 Crude Inventories
Wednesday-14:00 Fed's Beige Book
Thursday-08:30 Initial Claims
Thursday-08:30 Continuing Claims
Thursday-10:00 Factory Orders
Thursday-10:00 Pending Home Sales
Friday-08:30 Employment Report
The economic calendar is pretty heavy this week so we could see some above average volatility. The week ends with the monthly employment report on Friday morning. We will get a employment previews with the ADP report on Wednesday and Initial Claims on Thursday.
Tuesday-10:00 ISM Index
Wednesday-08:15 ADP Employment
Wednesday-10:00 ISM Services
Wednesday-10:30 Crude Inventories
Wednesday-14:00 Fed's Beige Book
Thursday-08:30 Initial Claims
Thursday-08:30 Continuing Claims
Thursday-10:00 Factory Orders
Thursday-10:00 Pending Home Sales
Friday-08:30 Employment Report
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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