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S&P 500 SPDR (SPY) – Weekly Report for July 31st

 

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SPY WEEKLY REPORT

  • Cyclical Trend  – Bearish on a monthly close below 107.43
  • Secular Trend  –  Bearish on a monthly close below 60.38

SHORT-TERM VIEW

SPY generated another new all-time high on Jul 27th. Without question, this is the most powerful bull market performance in the 24-year history of this ETF.

The bulls are firmly in control of this market.

The next short-term resistance level is 248.00. The bears need a close below 242.55 in order to capture the downside momentum.

Based on the current short-term view of SPY, there’s no reason to expect the market to surrender its dynamic price behavior. All five of the trend indicators are in bullish territory (which occurs very infrequently).

SPY is simply one of many stock index ETFs currently trading at an all-time historic high. At the very least, SPY is way overdue for a short-term correction. The vast majority of technical indicators have reached critically overbought levels.

Of course, these indicators have been stuck in overbought territory for the past several weeks. However, SPY continues to grind out new all-time historic highs almost on a weekly basis.

This is a perfect example which validates the fact that markets can move relentlessly higher week after week without experiencing any type of sizable correction.

LONG-TERM VIEW

The long-term view of SPY is just as bullish as the short-term view.

Generally speaking, SPY has moved straight up for the past eight years. Of course, there have been a few pullbacks along the way. However, the price corrections have been few and far between.

For the most part, SPY has enjoyed an uninterrupted bull market since March 2009.

During the past few years, there has been a never ending chorus of professional traders and investors who have unsuccessfully tried to call a top in the stock market (which would include SPY).

It certainly appears many traders, professional money managers and market newsletter writers have become fixated on calling the next “big crash.”

Based on current stock market sentiment readings, the bearish camp easily outnumbers those in the bullish camp. As long as this trend continues, SPY is destined to move higher over the course of the next several weeks.

Based on the long-term momentum studies, the next level of resistance for SPY is 259.92.

It’s always difficult to calculate a resistance level when the market is trading at an all-time high. One method that seems to yield good results involves adding the market’s true range to a series of Fibonacci levels.

Based on this calculation, 259.92 is the next long-term resistance level for SPY. The long-term support level is 211.30.

SHORT-TERM CHART

Please review the attached 4-month chart of SPY.

As you can see from the rectangular box, the market produced a very bullish “breakaway gap” on July 12th.

This is an incredibly powerful chart pattern.

Breakaway gaps tend to be the most profitable chart patterns. History tells us that most chart gaps are filled within a few days of formation. However, those gaps which are not filled within 3 to 5 trading days, often produce large price movements in the direction of the breakout.

Based on the short-term chart pattern, the next resistance level is 248.00 The short-term chart continues to remain bullish as long as SPY stays above 242.55.

Given the recent number of bullish breakouts, it appears rather unlikely the market will penetrate 242.55 any time in the near future.

LONG-TERM CHART

Here you will find a 10-year chart of SPY. This market has basically gone straight up for the past eight years. This is the most bullish chart pattern in the 24-year history of SPY.

Based on the current long-term chart formation, there’s no reason to expect this powerful bull market to roll over anytime in the near future.

Of course, bull markets don’t last forever.

Eventually, the bull run in SPY will reach its zenith & prices will begin to retreat. Most likely, the SPY bull market will end rather abruptly. However, at least for now, this market wants to move higher. The next long-term resistance level is 259.92.

The bears need a close below 211.30 in order to push SPY into bearish territory.

SHORT-TERM BUY/SELL LEVELS
LONG-TERM BUY/SELL SIGNALS

  • Bullish breakout @ 248.00 Bullish breakout @ 259.92
  • Bearish breakout @ 242.55 Bearish breakout @ 211.30

 

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