Is the bear market over? What to watch on a spy as market ETFs trend towards bull and bear index
SPDR S&P 500 Index spy It was trading up about 0.45% on Tuesday, benefiting from the 200-day simple moving average (SMA) on the daily chart.
The 200-day simple moving average is an important leading factor. Technical traders and investors consider stocks trading above the level on the daily chart in a bullish cycle, while stocks trading below the 200-day simple moving average are considered to be in a bearish cycle.
The 50 day simple moving average also plays an important role in technical analysis, especially when paired with the 200 day. When the 50 day simple moving average crosses below the 200 day simple moving average, a death cross occurs, while when the 50 day simple moving average crosses above the 200 day, a bullish golden cross occurs.
A death cross occurred on the SPY chart on March 14th, sending the ETF into a long-term bearish cycle. By June 17, SPY was trading 17.86% below the 200-day mark, causing the ETF to extend its bearish trend. At that point, the SPY RSI was measuring at just 31%, its lowest since January 27.
Since that date, SPY has bounced significantly, up nearly 19% and is currently testing the 200-day simple moving average for the first time since April 21.
Traders and investors will be watching to see if SPY can recover the level, if the ETF can stay above the zone for a while, and if a golden cross will occur.
Want a live analysis? Find me in the BZ Pro lounge! Click here for a free trial.
SPY chart: SPY started trading in a strong uptrend on July 14, hitting a recent higher low on August 9 at $410.22 and forming a recently confirmed high of $417.62 the day before. SPY has not retreated significantly to print a higher low in five trading days, which makes the ETF likely to pull back over the coming days.
- The 200-day SMA is a key level and the spy is unlikely to break through the area without consolidating first. Traders can watch the ETF print either a bull flag pattern below the 200 day or the spy will trade sideways below the level, possibly forming an inside bar pattern before reclaiming the area as support.
- Bearish traders will want to see SPY continue to reject the 200 day and then enter a significant bearish volume and throw the ETF into a decisive bearish cycle. Unless the 200 day SMA is restored, the recent rally could be a short bullish cycle within a long term bear market.
- A pullback, at least to form a lower top, is likely to come soon as the SPY Relative Strength Index (RSI) measures around 74%. When a stock’s RSI or ETF’s RSI reaches or exceeds the 70% level, it becomes overbought, which can be a sell signal for technical traders. The last time the SPY RSI reached above the 70% level was between November 2 and November 10, 2021, followed by a 5% decline between November 22 and December 3 of that year.
- SPY has higher resistance at $433.69 and $447.06 and support below at $426.56 and $420.76.
SEE ALSO: Why Investors Shouldn’t Be Too Happy About 8.5% CPI Inflation; They ignore “The Elephant in the Room”