SPY Beginning a New Bullish Cycle?
SPY 60 minute charts are beginning a new bullish cycle. If the close above its signal line is followed by another bullish day, we should see confirmation in the next day or two. While the index ETF is in the early stages, the 10-day downward leg is showing the early signs of a reversal. Expect some pullbacks to the rising moving averages as price action transitions into this cycle.
Summary
SPY Bullish Cycle
Note RSI has spent the majority of this downward leg below 50 until recently. Monday price action shows 7 candles all closing above the 20ma and Bollinger Bands are turning upward. These bands are tight as well, signaling a compression of the higher volatility that preceded Monday’s change in character.
More importantly, TICK cumulative turned upward on Friday, and for the second day closed above its signal line (9ema) to complete a bullish turn. This change in character needs to be followed by another bullish close today, as Renko remains in a range-bound pattern.
All things considered, we plan on waiting for confirmation as the week unfolds. A bullish close today would help cement the developing bullish cycle. Look for stocks to respond in kind only after confirmation.
As a side note, the recent down leg in the major indices has frustrated many traders and investors alike. Patience and caution have been warranted over the past two weeks. Therefore, we will continue to take smaller positions until we see some relief from this overriding bearish sentiment. In other words, take less risk.
Futures are trading lower in the pre-market session.
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Happy Trading,
Vinny
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