With a 4.51% run the last seven days, the S&P 500 ETF (SPY) is short-term overbought and showing signs of indecision. Chartists do not need a momentum oscillator to figure out that SPY is short-term overbought. This 7-day rally is the strongest since the first week of December. Despite being overbought then, the market continued higher throughout that month and did not correct until late February. There were, however, some 1-3 day pullbacks during this strong advance. Friday's doji formed in the middle of the prior trading range (yellow box). This congestion zone could generate some resistance.
On the 60-minute chart, SPY surged through resistance from the broken support levels in the 130 area. RSI also surged above 65 to turn momentum bullish. The move from ±125 to ±131 was quite impressive. Broken resistance and the blue trendline combine to mark the first support level at 130. A move below this level would provide the first sign of weakness. For now, I will base key support on last week's low, just above 128. A higher key support could be established this week as the market works off this short-term overbought situation
Key Economic Reports/Events:
Mon - Mar 28 - 08:30 - Personal Income & Spending
Mon - Mar 28 - 10:00 - Pending Home Sales
Tue - Mar 29 - 09:00 - Case-Shiller Index
Tue - Mar 29 - 10:00 - Consumer Confidence
Wed - Mar 30 - 07:00 - MBA Mortgage Index
Wed - Mar 30 - 07:30 - Challenger Job Cuts
Wed - Mar 30 - 08:15 - ADP Employment Change
Wed - Mar 30 - 10:30 – Oil Inventories
Thu - Mar 31 - 08:30 - Jobless Claims
Thu - Mar 31 - 09:45 - Chicago PMI
Thu - Mar 31 - 10:00 - Factory Orders
Fri - Apr 01 - 08:30 - Employment Report
Fri - Apr 01 - 10:00 - ISM Index
Fri - Apr 01 - 10:00 - Construction Spending
Fri - Apr 01 - 15:00 - Auto-Truck Sales
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:
Mon - Mar 28 - 08:30 - Personal Income & Spending
Mon - Mar 28 - 10:00 - Pending Home Sales
Tue - Mar 29 - 09:00 - Case-Shiller Index
Tue - Mar 29 - 10:00 - Consumer Confidence
Wed - Mar 30 - 07:00 - MBA Mortgage Index
Wed - Mar 30 - 07:30 - Challenger Job Cuts
Wed - Mar 30 - 08:15 - ADP Employment Change
Wed - Mar 30 - 10:30 – Oil Inventories
Thu - Mar 31 - 08:30 - Jobless Claims
Thu - Mar 31 - 09:45 - Chicago PMI
Thu - Mar 31 - 10:00 - Factory Orders
Fri - Apr 01 - 08:30 - Employment Report
Fri - Apr 01 - 10:00 - ISM Index
Fri - Apr 01 - 10:00 - Construction Spending
Fri - Apr 01 - 15:00 - Auto-Truck Sales
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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