Is SPY [& Thus the Broader Market] Ready To Launch Anew?


The stock market ended Friday's holiday-shortened session on a mixed note, but overall, things held up pretty well. The main indices showed nice resilience [SPX $4026.11, -$1.16, -.03%] to selling efforts on below-average volume despite a decent hit to Apple (AAPL $148.11, -$2.96, -2.0%).  Early in the day, Reuters reported that iPhone production in November is projected to be curtailed by at least 30% at the Foxconn facility due to worker unrest that stems from pay disputes and COVID concerns. On a related note, record high COVID cases have prompted more lockdown measures that have reportedly brought Beijing to a near standstill... again.

Coincidentally, China announced new stimulus measures, including more credit support for property developers. The People's Bank of China also announced a 25 basis point cut in the required reserve ratio for most banks, which will free roughly CNY500 bln of liquidity, starting December 5th.

The lack of participation today was reflected S&P 500 sector performance. None of the 11 sectors moved more than 0.7% in either direction. The "biggest" move was made by the communication services sector (-0.7%), which was weighed down by Activision (ATVI $73.47, -$3.12, -4.1%). The company sold off on news that the FTC may file an antitrust lawsuit to block Microsoft's (MSFT $247.49, -$0.09, -0.04%) acquisition of Activision.

On the flip side, the real estate (+0.6%) and utilities (+0.6%) sectors sat atop the leaderboard.

Treasury yields climbed off overnight lows today. The 10-yr note yield, which hit 3.65% overnight, sits at 3.71% now. The 2-yr note yield, which hit 4.43% overnight, sits at 4.48% now.

There was no U.S. economic data of note.

For the week, we saw SPY +1.59%, again on moderate volume given 1 less day than normal, a half day on Friday and the fact that most people pulled the plug on the week early anyway.

Now let's take a look at the charts across timeframes.

Monthly - The higher low [2] put in last month [and confirmed this month] relative to the low made in 2020 [1] at the advent of the global pandemic suggest it's possible that SPY has truly bottomed here at support [2] and is beginning of a new leg higher.  It's true, the chart looks compelling on a structural basis, it's hard to envision price resuming the long running upward trek in the face of ongoing inflation and the ever rising cost of capital.  That said... traders trade what's in front of them... not what they think things should be.

Weekly -- The weekly chart here shows how it's possible to have competing trends... in the same security.  Given the lower low [3] relative to [1] and the lower high [4] relative to [2], it's tough to get long unless price can exceed [2] before breaching [3] to the downside.

Daily - the daily chart confirms the weekly in much the way you would expect...[1] is the relative high and [2] is the relative low.  I wouldn't worry about [or think about for that matter] trying to get long based on this chart unless an price can exceed [1] to the upside.

Bottom Line:  #SPY is in the throes of making a decision about the next trend.  If you're a SPY trader, I suggest you wait for some clarity before entering.

If you're not yet a SPY trader, and think you'd like to learn more in order to head into 2023 well prepared to begin extracting side hustle profits from the market, grab a free subscription to my substack newsletter to stay up to date and be alerted when there's chance to join my team.

In any case, I hope this helps.