The S&P 500 ETF (SPY) has provided some opportunities for patience, disciplined traders, while it has punished momentum chasers. One reason has been its propensity to get rejected at its upper end of the range during 2015 (i.e. technical resistance).
Below is a chart showing the trading action in 2015 for the S&P 500 (SPY). Further down is a list of 10 trading observations about the price action here.
1. The year-to-date return for SPY in 2015 is 2.96% (through Friday); this is a range bound market.
2. For the past four months, the S&P 500 ETF has found technical support at $203.50 and resistance at $212.50.
3. SPY closed above long term resistance on Friday. However, momentum breakout signals have lower success rates when in range bound markets.
4. The MACD indicator still has a bearish reading. Bulls want to see a cross to the upside with price follow through.
5. RSI is at 56.45. This is roughly where SPY has been rejected in 2015.
6. SPY is now extended from its 5 day EMA, to which it has been retracing throughout this year.
7. SPY moved from near-term support to near-term resistance on Friday on the Jobs Report. The time to be in was before this move, as chasing has not worked out well this year. Better probabilities of success are found in buying deeper dips for a better risk/reward ratio.
8. Leading stocks have settled into ranges: Apple (AAPL), Facebook (FB), and Google (GOOGL) to name a few. Meanwhile, stocks like LinkedIn (LNKD), Twitter (TWTR), and Chipotle (CMG) have fallen dramatically in recent weeks. The majority of stocks are being traded inside price ranges, not accumulated at higher prices.
9. Overall this year, we go down on higher volume, and up on lower volume.
10. This market has had a tendency to return quickly to near-term support levels each week, providing dip buying opportunities for the patient and disciplined, and losses for those that like to chase momentum.
Thanks for reading.
The author does not have a position in any mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.