Looking for Opportunity with SPY Weakness
The latest Chapter in the current SPY consolidation appears to be an opportunity. As long as the lower range holds this morning near 271.00 (+/-), SPY presents a good risk/reward to the long side.
Volume in both directions has been very low. Blocks or the lack thereof shows institutions are ambivalent, reflecting little conviction. In addition, many stocks are breaking out and holding near breakout levels, so the indices differ from the stocks that trade on each index.
SPY Daily – Opportunity or Trap?
The narrow three (3) point range seems to provide an opportunity this morning.
In each case since January, pivots have reversed immediately with ferocious selling in the opposite direction. Each pivot high was met with instant weakness. In the latest case, we are consolidating in a narrow horizontal range, with RSI remaining above 50. It’s this change in character that has us leaning to the bullish side longer term.
Major VBP support is near 50% Fibonacci retracement levels at 266.00 (+/-) coexistent with the flat 50ma.
We also see that TICK cumulative is still rising, albeit similar to the December period, where it eventually crossed over in a bearish direction. The moving average would need to turn lower as well, to change our outlook going into the summer months. Similarities were news-driven, with speculation over the tax reform bill then and trade-war fears now. Eventually, good sales and earnings broke the stalemate.
Finally, the long-term trend is intact, with the weekly 50ma rising. Price is above the 20ma. In each of the last nine (9) weekly candles,, buyers showed up at the lows. That’s institutions buying.
SPY Direction – Needs Confirmation
News can certainly hold us at the station, but eventually, it will be sales and earnings that win out. If you hold bullish prospects for the market, we’ll need to see confirmation. We need to break above 274.50 (+/-) in the near term. After that, we should head for 277.50 (+/-), then a revisit of January highs and a potential double top.
Until then, today’s line in the sand is the 271.00 level – support. Overhead blocks were served up after hours at 272.71. Thats resistance for now. Bullish above and bearish below.
SPY Options – Consider buying the weekly calls.
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