On August 26th, after a 3-week vacation, I came back to observe and write this:
“I wish I could say it was that easy-that the SPY is not only doing better than it did in early August, but that it has bottomed since then as well.
However, when looking at the S&P 500 ETF – NYSEARCA: SPY – there are two distinct possibilities looking at both the daily and weekly charts.
First is that we have bottomed above 280 based on the 200-Daily moving average and the August 5th low of 281.72.
The other possibility is that the support for the S&P 500 ETF (SPY) has found at these levels is merely enough for the chart to complete a somewhat lopsided right shoulder of a head and shoulders top.”
I went on to write, “What would make this rally go the way of the extinct dinosaur?
It will begin with a weekly close under 280. However, until we see a death cross on the daily chart and then a break of the 200-WMA, we are still calling this a correction.”
To date, the correction scenario is accurate. The market did indeed bounce from 280 in SPY and, the lopsided right shoulder of the potential head and shoulders top remains intact.
In other words, SPY bounced, but only in its existing wide trading range.
Key price levels for stock market ETFs:
S&P 500 (SPY) This cleared 290 which makes that a pivotal number. Should it fail on a closing basis, then bears gain control. 294.15 is the area this needs to clear to continue the rally
Russell 2000 (IWM) 148.00 now key support to hold for this to stay firm. But nothing terribly exciting happens for the bulls unless it clears 152-153.
Dow Jones Industrials (DIA) 260 now key support with 266 the 50 DMA to close and hold above
Nasdaq 100 (QQQ) 2 inside weeks., which is significant because it proves the range theory. This must clear 189.50 and close above to continue north and hold 181.50 to avoid going further south.
KRE (Regional Banks) A low volume reversal is not as powerful as one with big volume. Must hold 49.50 to stay in the game.
SMH (Semiconductors) Unconfirmed bullish phase not surprising considering this has been the strongest sector. It must close again over 113.05 to stay bullish.
IYT (Transportation) This did have an accumulation day of volume on Wednesday. That makes for a legitimate reversal bottom. So now it must hold 179.50. Then clear 186. I’d keep big eyes here as this sector is the key to evaluate the market’s next direction.
IBB (Biotechnology) The 200 WMA at 102.71 pivotal. A weekly close above would engender confidence in the upside.
XRT (Retail) Possibility this has multiple bottoms around 38 and could run higher from here. It must hold 39.50, and then clear 41.50
The author may have a position in the 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.