Art's Charts

Short-term Breakout Holds for SPY

Arthur Hill

Arthur Hill

Chief Technical Strategist, TrendInvestorPro.com

With a bounce over the last four days, MACD (5,35,5) crossed above its signal line on Thursday's close. Red dotted lines mark prior signals when MACD formed a bearish divergence AND crossed below its signal line. The last such signal occurred on October 21st. Green dotted lines show when MACD crossed back above its signal line. Even though this crossover could be used as an exit on short positions, a good portion of profits have been lost because SPY is already 3% above its reaction low. Traders need to pick profit points and exit before the signal line crossover to make this trading system robust.


091106spyd

Technically, the medium-term trend remains up as SPY held above its early October low. Therefore, this bounce has the bigger uptrend backing it up. I am, however, concerned that we could see a bear hook in MACD. This occurred in mid June when MACD moved above its signal line for a few days and then crossed back down. Again, too much ground would be lost if we wait for MACD to cross below its signal line. Therefore, I would turn to the 30-minute chart to identify a bearish trend reversal.

091106spyi

SPY remains in a short-term uptrend on the 30-minute chart. The ETF broke resistance at 105.5 on Wednesday morning and again on Thursday morning. More importantly, the support zone around 104.5-105 held. Also notice that CCI moved above +100. At this point, the short-term trend is up until proven otherwise. How long and how far it carries is anyone's guess. We can, however, identify the criteria for reversing this uptrend. A break below key support at 104.5 and a CCI move below -100 would to the trick.

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More