SPY broke above its summer highs and closed at its highest level since the second week of May. Perhaps the advance is accelerating higher with this breakout. At this point, the bulls are in clear control and I am focused on what it would take to turn this chart bearish. As noted in Monday's market message, the advance looks like an ABC correction. Wave C is sometimes equal to Wave A, which would target a move to around 115. There is also a rising price channel taking shape. I drew the lower trendline first and then the upper trendline parallel. This trendline extends to around 116 by the end of the month.
On the 60-minute chart, SPY surged above 107 during the first hour on the first day of September. Since then the ETF has zigzagged higher as buyers have kept the pressure on. With another surge today, I am raising key support to 111.5. Last week's consolidation lows confirm this support level. A failure to hold today's gains and a break below last week's lows would be bearish. RSI moved above 70 for at least the third time this month. This shows strong buying pressure consistent with a strong uptrend.
It's Fed week and there are several housing market indicators on deck, four to be exact. Tuesday trading could flatten out heading into the Fed policy statement. Come to think of it, trading has been flattening out for a week now. Volatility usually surges just before and after the statement. Sometimes there are false moves or break outs that are reversed when cooler heads prevail on Wednesday morning.
Key Economic Reports:
Mon - Sep 20 - 10:00 - Housing Market Index
Tue - Sep 21 - 08:30 - Housing Starts
Tue – Sep 21 – 14:15 - FOMC Rate Decision
Wed - Sep 22 - 10:30 – Oil Inventories
Thu - Sep 23 - 08:30 - Initial Claims
Thu - Sep 23 - 10:00 - Existing Home Sales
Thu - Sep 23 - 10:00 - Leading Indicators
Thu - Sep 23 - 13:00 – Volcker speaks
Fri - Sep 24 - 08:30 - Durable Orders
Fri - Sep 24 - 10:00 - New Home Sales
Fri - Sep 24 - 10:00 – Fed governors Lacker and Plosser speak
Charts of Interest: AON, LOW, PAYX, SCHW
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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