The 7-month streak of first day-of-month gains was broken on March 1st as stocks declined rather sharply. SPY surged to resistance around 132.5-133 on Monday and opened above 133.5 on Tuesday. This early gap did not hold as the ETF quickly reversed and moved sharply lower. Last week's gap offered resistance in the 134 area. SPY now has a lower high working and RSI broke back below 40 to turn momentum bearish. The short-term evidence is slowly shifting towards the bears. Key support remains at 129.5. A move below this level would forge a lower low and signal the start of a short-term downtrend.
On the daily chart, SPY opened strong and closed weak to form a rather large bearish engulfing pattern. This black candlestick is the longest since late January. More importantly, this long black candle formed below last week's high and met resistance from last week's gap. This is not a good sign. CCI moved back into negative territory for the second time in two weeks. Should a full correction take hold, the retracement cluster around 122-124 marks the target zone. We could certainly see more fireworks (bullish or bearish) because the employment report is on Friday.
Key Economic Reports/Events:
Wed - Mar 02 - 07:00 - MBA Mortgage Index
Wed - Mar 02 - 07:30 - Challenger Job Cuts
Wed - Mar 02 - 08:15 - ADP Employment
Wed - Mar 02 - 10:00 – Bernanke Testimony
Wed - Mar 02 - 10:30 - Crude Inventories
Wed - Mar 02 - 14:00 - Fed's Beige Book
Thu - Mar 03 - 08:30 - Initial Claims
Thu - Mar 03 - 08:30 - Continuing Claims
Thu - Mar 03 - 10:00 - ISM Services
Fri - Mar 04 - 08:30 - Nonfarm Payrolls
Fri - Mar 04 - 10:00 - Factory Orders
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.
Key Economic Reports/Events:
Wed - Mar 02 - 07:00 - MBA Mortgage Index
Wed - Mar 02 - 07:30 - Challenger Job Cuts
Wed - Mar 02 - 08:15 - ADP Employment
Wed - Mar 02 - 10:00 – Bernanke Testimony
Wed - Mar 02 - 10:30 - Crude Inventories
Wed - Mar 02 - 14:00 - Fed's Beige Book
Thu - Mar 03 - 08:30 - Initial Claims
Thu - Mar 03 - 08:30 - Continuing Claims
Thu - Mar 03 - 10:00 - ISM Services
Fri - Mar 04 - 08:30 - Nonfarm Payrolls
Fri - Mar 04 - 10:00 - Factory Orders
Charts of Interest: Tuesday and Thursday in separate post.
-----------------------------------------------------------------------------
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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