While some traders argue that we entered into a new stage since Chairman Powell hopefully is now by our side (bullish side), some analyst argue that the macroeconomic data hasn’t improved and that should keep us at least cautious about how markets will behave, taking into account that FED’s rate is not the only variable that matters to markets.
Having said that, now let’s take a look at some key indicators, which hopefully will be a guidance for the days ahead.
After a really good start of the year, the SPY rally that begun late December, it is finally showing signs of exhaustion. During the January and February rally, the SPY was able to close on its daily chart above its 9EMA every single day (ignoring one day at early January while it was consolidating), showing strength for the days ahead. Nevertheless, on last March 6th showed some weakness after closing for the first time after almost two months below its 9EMA. After that, it went straight to its daily 200SMA (around 275), before falling further to 272 levels, where it was able to found some buying force.
If we look back to October/2018, the SPY, after finish with its almost 6 months rally, retraced on its weekly chart until its 50SMA, level who provided some support before bounce to its daily 9EMA, level which was subsequently sold opening the doors to further losses.
After that, the SPY ranged between 260 and 280, being the upper level its daily 100sma, which became a resistance for at least 3 times.
Coming back to these days, the SPY, after failed to defend both its daily 9EMA and its daily 200SMA, closed the week with a considerable size red weekly candle, which by the way showed some buying force again on its weekly 50SMA.
So what’s next? I certainly don’t know, but after a red weekly close, traders must be cautions before start “buying the dip”, as it is likely that this week’s dip, won’t be the the last one.
My base scenario for the coming days is a bounce continuation until we reach the daily 9EMA, level which have been sold on previous ocations after being violated. After that, I am looking for a retracement to its daily 100SMA, level which is also very close to daily 50SMA.
It makes sense to me that the daily 100SMA which previously was a key resistance level, now it may be a support for the markets, contributing to the bullish narrative for the months ahead.
Hope you find useful this information.
Keep calm and trade safe.
Cheers,
Arturo Pineda