SP 500 ETF- SPY Weekly Analysis (6-20-10)

S&P 500 ETF- SPY Analysis (6-20-10)

S&P 500 ETF SPY

The S&P 500 ETF ,” that uses the symbol “SPY,” has been influenced by the stock market this week. Its stock price stands at $115.46 As we learn in MSN Money Snaphot they write this about the Fund: “The investment seeks to correspond generally to the price and yield performance, before fees and expenses, of the S&P 500 Index. SPDR Trust is an exchange-traded fund that holds all of the S&P 500 Index stocks. It is comprised of undivided ownership interests called SPDRs. The fund issues and redeems SPDRs only in multiples of 50,000 SPDRs in exchange for S&P 500 Index stocks and cash.”

We finally had a week of gain! But caution is still the best teacher. The gain was on account of our huge 200+ gain day on Tuesday. unfortunately the markets could not capitalize upon that one day. Sellers won out over buyers the last two days.

But there is a reason for this! Friday was a quarterly quadruple witching day with stock options, options on futures, single stock futures and index futures all expiring. Expiration can move markets starting days before however, with prices tending to move in the opposite direction of their recent trends during the week
of expiration. 

Two quick observations! 

First of all, as the week would wind down, volume also shrank. we could not capitalize upon the huge upswing Tuesday, by Friday we had lost momentum. This
does not sit well for a continued move upward on Monday. Second, we have bounced off the top of the Bollinger Bands and should now continue in a downward direction.

The only way we are going to continue to move up is if the Bands widen and the SPY suddenly continues to follow the bands upward. We do not expect this to happen. Looking at the larger chart above, we can see a very significant resistance level at 114.2.

This level was well defined going into the last quarter of 2009 and challenged again in January of this year. The key this week is to see if we continue downward 5 to 9 points again or if we are going to push up through this mark and then continue through the 50 day MA. This is the great observation that we need to make.

There are two governing points of view this week:

The Calafia Beach Pundit, from Seeking Alpha is widely followed and they write: “The Vix index has dropped to 24 after spiking to 48 on May 21st. Two-year swap spreads are now back to “normal” levels of 34 bps, after spiking to 64 on May 25th. The surge in the Vix and in swap spreads preceded the slump in the S&P 500, which reached a low on June 4th. It would appear to me that with fear, uncertainty and doubt fading fast, the equity market looks poised to enjoy some handsome gains in the days and weeks ahead.” So they are of the opinion we are in a short term bullish pattern.  

On the other hand, John Spence from Market Watch writes: “The market’s largest exchange-traded fund by assets, SPDR S&P 500 ETF /quotes/comstock/13*!spy/quotes/nls/spy(SPY111.70, -0.03, -0.03%) , has so far managed to defend Tuesday’s big jump, yet on declining volume. Call it the World Cup or the onset of the market’s summer doldrums, but activity in the SPDR S&P 500 ETF points to declining volume after May’s market gyrations.” So we are also of the opinion here that the bulls will not come back, at least not yet.

This is what we beleive–

Through the summer and into mid fall we are going to be having extend periods of bullish & bearish movements, but not a well defined move. We could have 2 to3 weeks of movement in either direction, but by the end of the movement, when we establish a well defined market pattern we will end up seeing a market that has been fickle with lower volatility and a large trading zone. Get ready for sideways movement for quite a while. Prepare to trade on these swings and look for numerous large daily swings. 

You can find more research like that and stock trade research at EmpoweredInvestingNow.com