SPDR S&P 500 ETF SPY News and Forecast: Why is SPY rising?

• SPY continues to drive higher and registers another gain on Tuesday.
• S&P 500 backed by buybacks and Fed wall of money.
• SPY still topping WallStreetBets list of favourite stocks.

The S&P 500 and SPY exchange-traded fund (ETF) just keeps on trucking, and as ever we would be foolish to stand in the way of a moving train. There are some worrying features to this rally with the number of stocks making 52-week highs continuing to fall, see below. The chart is actually of the 9-day moving average of the number of stocks making 52-week highs as this smoothes out things somewhat, making it more readable. Anyway, we can see the trend is lower despite the SPY stock pushing higher.

Something else closely watched by market technicians is the number of stocks above the 200-day moving average, and this is also declining, see below.

The options market is also turning more and more bearish with the put/call ratio moving higher. This is pretty self-explanatory as people buy puts when they are bearish.

All this means nothing of course if the actual price is going up, and that is exactly what the SPY is doing. Price is the ultimate indicator, and you just have to follow what that tells you. Sentiment is increasingly bearish if social media and postings on the main boards such as Tradingview and Stocktwits are anything to go by. It seems we are all looking for the pulback. However, being in the crowded trade is usually the wrong one, and it would not work well to squeeze all those shorts out of their position first. Then the SPY could dump. 

22% of the S&P 500 ETF SPY is taken up by Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Facebook (FB), Google (GOOGL) and Tesla (TSLA), so get the direction of those correct and you have a solid base to work on. As we have pointed out elsewhere, most of the mega tech names are struggling. Apple fell after results. Citing supply issues (see more), AMZN also dropped. Facebook dumped on ad revenue concerns. Only Google and Tesla (see more) look bullish. 

However, the theme of the pandemic remains unaltered: the Fed has the market's back with a wall of cash to print. This is now being added to by corporates who have stockpiled cash since the pandemic began. According to Truist, cash has balooned from $1.5 trillion to $1.9 trillion for S&P 500 (SPY) companies, and this cash is due to be used for one of the biggest share buyback programs ever witnessed. 

SPY stock forecast

Yesterday we pointed out some bearish indicators on the SPY stock with a bearish divergence across the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI). This is still the case, but Tuesday's price action was bullish with an early sell-off rejected. The SPY rallied to close toward the high of the range, with the point of control also near the high of the day. This is the price with the highest volume on the day. An indecisive engulfing candle has set things up for an interesting day on Wednesday. Look for an opening move lower to be again rejected as $441 is the key to be taken out. MACD and RSI look close to breaking out of our bearish divergence, so keep a close eye here. $437 is the short-term key support, intraday.