Art's Charts

SPY Defies Low Volume to Maintain Uptrend

Arthur Hill

Arthur Hill

Chief Technical Strategist, TrendInvestorPro.com

Despite low volume the last few months, the stock market continues to move higher. Let this be a lesson. Volume is an indicator that comes second to price action. In addition, overall volume is not as important as the balance of volume. Total volume may be low, but stocks can continue moving higher as long as buying pressure is stronger than selling pressure. SPY volume has been below its annual average since early December. Even so, On Balance Volume (OBV) and the Accumulation Distribution Line moved to new highs over the last few weeks. The new highs in these indicators confirm the new highs in SPY. Other than that, the song remains the same. SPY is overbought and ripe for a correction, but there are simply no signs of significant selling pressure.

110214spyd


On the 60-minute chart, SPY gapped up the last two Monday's and both gaps held. The ETF is up around 4.2% the last ten days. Broken resistance and the gap mark the first support zone around 131-131.5. A move below this level would show the first sign of weakness. However, as we have seen recently, even the smallest dips bring out the buyers. RSI has been in bull mode since breaking above 60 ten days ago. Look for a move below 40 to turn momentum bearish.

110214spyi

Key Economic Reports/Events:
   
Feb 15 - 08:30 - Retail Sales    
Feb 15 - 08:30 - Empire Manufacturing        
Feb 15 - 10:00 - Business Inventories        
Feb 15 - 10:00 - NAHB Housing Market Index        
Feb 16 - 07:00 - MBA Mortgage Purchase Index   
Feb 16 - 08:30 - Housing Starts/Building Permits
Feb 16 - 08:30 - PPI        
Feb 16 - 09:15 - Industrial Production       
Feb 16 - 10:30 - Crude Inventories        
Feb 16 - 14:00 - Fed Minutes                        
Feb 17 - 08:30 - CPI        
Feb 17 - 08:30 - Initial Claims
Feb 17 - 10:00 - Leading Indicators    
Feb 17 - 10:00 - Philadelphia Fed

Charts of Interest: Tuesday and Thursday in separate post.

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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.
Arthur Hill
About the author: , 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. Learn More