What Once Was Resistance
Given the market’s near addiction to low interest rates and recent price action, it is helpful to get some guideposts based on the expression:
“What once was resistance may now act as possible support.”
The expression above includes two key words: “may” and “possible”, meaning there is no market law bounding price to act in any particular manner at any particular level. However, we know markets often retest breakout levels or areas of past resistance.
S&P 500 Weekly
Weekly charts can help us zero in on the most important levels. The weekly chart of the S&P 500 below shows, prior to the recent bullish breakout, sellers became more active between 2,096 and 2,122. If those levels are taken out on a weekly basis, our concerns would increase with a weekly close below the Brexit low of 2,037.
Weekly charts print only one price each week. Therefore, intraweek moves are not as relevant as the close for the week.
SPY Weekly
The weekly chart of the S&P 500 ETF (SPY) below shows, prior to the recent bullish breakout, sellers became more active between 207.46 and 209.15. If those levels are taken out on a weekly basis, our concerns would increase with a weekly close below 202.91.
Prudent To Respect All Outcomes
While the longer-term outlook has not deteriorated in a significant manner yet, as outlined on September 9 and September 12, recent volatility and the near-term economic calendar tell us to respect any and all outcomes. With two economic reports (PPI and CPI) related to inflation on this week’s docket, the market will be watching closely. If there is one thing that can force the Fed’s hand on interest rates, it is a surprising pop in inflation. Our ETF scoring system tells us our positions are a bit more vulnerable, but the facts have only moved into a “pay closer attention” zone at this time.
This entry was posted on Tuesday, September 13th, 2016 at 1:15 pm and is filed under Stocks - U.S.. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
Copyright © 2016 Ciovacco Capital Management, LLC. All Rights Reserved. Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC (CCM). Terms of Use. This article contains the current opinions of the author but not necessarily those of CCM. The opinions are subject to change without notice. This article is distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. The charts and comments are not recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations are not predictive of any future market action rather they only demonstrate the opinion of the author as to a range of possibilities going forward. All material presented herein is believed to be reliable but we cannot attest to its accuracy. The information contained herein (including historical prices or values) has been obtained from sources that Ciovacco Capital Management (CCM) considers to be reliable; however, CCM makes no representation as to, or accepts any responsibility or liability for, the accuracy or completeness of the information contained herein or any decision made or action taken by you or any third party in reliance upon the data. Some results are derived using historical estimations from available data. Investment recommendations may change and readers are urged to check with tax and investment advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CCM would like to thank StockCharts.com for helping Short Takes create great looking charts Short Takes is proudly powered by WordPress . Entries (RSS)