Tuesday, November 29, 2016

Chart Talk {SPY}

A chart of the S&P 500 ETF {Symbol SPY*}.  Chart is from of Tradingview.com and you can double-click on it to make it larger if you would like.

SPY has traded straight up since the election.  It is up nearly 6% since the lows reached in early November.  Yesterday saw the ETF pull back about a half of a percent from all time highs last Friday.  Probability would suggest that at some point a move like this needs a breather.  Then again one could argue that with market seasonality just around the corner, we could keep moving higher in the index and begin to rob some of next year's gains out of the market.  This becomes more plausible if money managers panic into the market trying to make their year in the next few weeks.   It's been a horrible year for most active managers and it is likely some of them are chasing the markets.  Remember, the only trade most of Wall Street gets paid on is the one printed at 4:00, December 30th this year.  That's the last trading day for 2016.  

In any event SPY is overbought by our work across multiple time frames.  That doesn't mean it can't continue to move higher.  It just means it's overbought.   A higher probability scenario {especially in the absence of an unlooked for event} would see a period of digestion in the index before another attempt at an advance in the final weeks of the year.   No guarantees on that though and remember it's been a crazy trading year in the markets.

*Long ETFs related to the S&P 500 in client and personal accounts although positions can change at any time without notice or dissemination on any other form of electronic media.