carvil_

SPY - next leg down?

AMEX:SPY   SPDR S&P 500 ETF TRUST
After this amazing rally, things are starting to turn. As you can see in the 1-hour chart:
  • there is an RSI divergence, where SPY was making new highs while the RSI indicator was making lower highs;
  • the volume level has been decreasing consistently over the past weeks;
  • SPY's price has been facing major support around the 50% fib retracement level ($278.60);
  • MACD is approaching 0 and potentially turning negative.

Given the economic data being released, I think this bear rally has lost its steam. There might be one final push to fill the gap at $287, but even that sounds difficult at this point. I expect $258 to be tested again soon (long-term support line, highlighted in blue).

What do you think?

Comments

Gilead news just broke that early testing results are good, SPY futures up, otherwise, agree. I think the bears are too early, we have to wait for a new catalyst, Im thinking when 2nd wave hits and cities/states might have to close again is when we see retests....my 2 cents.
+1 Reply
carvil_ nsinu
@nsinu thanks for your comment. For our own sake, I hope the medicine does work. I read the press release and they mention this, though:

"The lack of a control arm in the study could make interpreting the results more challenging."

So they ran the study without a control group, which means the results aren't scientifically viable. I'm not sure the FDA can approve a drug under those circumstances...

But, going back to the TA above, I still don't think we will break above the rising wedge. We could be still looking at $287, or even 290 for the top of the wedge. Above that sounds overly stretchy. Since the rising wedge is narrowing fast, we will make it or break it at some point next week... I still think it's down, but I'm not sure about re-testing the lows. It might be just a re-test of 2500 for now.

But I'm still keeping a healthy dose of skepticism here, this rally went far beyond anyone could have imagined and the bulls are still strong...
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nsinu carvil_
@carvil_, I'm wondering if we will just "meander" around in a trading channel something between 280 and 250 this summer, although I agree there is a wedge forming. It's almost like the market doesn't know which way to go, went down so fast but Feds stepped in fast too. Market is screwing the bears for sure BUT it's also scary to go full on bull since we haven't seen a retest of the lows. Almost like the market is playing chicken with us all.

I don't know what's going on! LOL! Have a feeling we will have case studies about this market latter on, this is just such an interesting market.
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