• SPDR S&P 500 (SPY) continues bouncing on Thursday.
  • SPY ETF retraces to the 21-day moving average.
  • Is this a dead cat bounce or time to buy the dip?

The SPY continued its recovery play on Thursday as the move accelerated from Wednesday's positivity. Wednesday was the first up day for the SPY in five sessions with a 0.98% gain, but the move picked up the pace on Thursday when SPY closed up 1.22%. Not exactly stellar but solid steady performance after a tough September. The catalyst was the by now well-discussed Evergrande situation. With an interest payment being made by the sick man of the Chinese real estate industry, markets were less nervous over this. More pertinent though was the Fed surprising markets slightly with the lack of a tapering timeline but discussing a rate hike in 2022.

We feel the reaction was overall positive as rate hikes are now in investors' minds and not causing too much distress. Technically, the short term may provide some difficulties, and the market mood appears to be looking for negative news flow: never a good sign. Evergrande is unlikely to be another Lehman, but nervousness is rising. Keep an eye on the VIX for your guide to this. Despite yesterday's rally, the VIX spiked back to near 20 again. When the VIX spikes above 20 this year, it has been signaling some trouble ahead for stocks.

SPY 15-minute chart

As we can see the move on Thursday was straight from the open and this strength carried through for the remainder of the session. The SPY also closed near the high of the day. 

SPY stock forecast

The weekly chart below shows the long-term wedge formation in place since nearly this time last year. The SPY has just broken out of this wedge and put in place a series of lower continuation bars. Clearly, the uptrend is stalling or at least presenting us with a dip opportunity. Taking out last week's high at $448.92 is unlikely this week, so next week's target will be this week's high at $444.89 to give a potential reversal candle on the weekly chart.

SPY weekly chart

Looking at the daily chart, this one starts to look more and more like a reversal when you see we created a lower low by breaking the 19 August low. We already have a series of lower highs in place. This is the first time in 2021 we have dipped below a previous dip level. Below $432 the volume profile bars also drop off, meaning a move could accelerate to the next high volume support zone at $420. The recovery on Wednesday and Thursday was also not enough to take the Relative Strength Index (RSI) above 50 and so is technically in bearish territory. 

FXStreet View: Bearish, bullish above $448.92. 

FXStreet Ideas: Sell near $448 with a stop above a break of $448.92. Stong support zone is at $414.

SPY daily chart

 

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

EUR/USD resumes its decline, approaches multi-year low

EUR/USD resumes its decline, approaches multi-year low

EUR/USD lost its bullish momentum and declined below the 0.9600 area during the American trading hours on Tuesday. The negative shift witnessed in risk sentiment seems to be helping the dollar gather strength and causing the pair to stay on the backfoot.

EUR/USD News

GBP/USD retreats from daily highs, trades below 1.0700

GBP/USD retreats from daily highs, trades  below 1.0700

GBP/USD erased a portion of its daily gains in the second half of the day on Tuesday and fell toward 1.0680. The dollar capitalizes on upbeat consumer confidence data and the risk-averse market environment further weighs on the pair.

GBP/USD News

Gold on its way to piercing $1,600

Gold on its way to piercing $1,600

Gold reached a fresh 2-year low, bottoming at $1,621.04. XAUUSD recovered ahead of the US opening, extending intraday gains to as high as $1,642.39 amid easing dollar demand. The better performance of equities weighed on the greenback.

Gold News

Powell calls for proper crypto regulations as Bitcoin shoots beyond $20,000

Powell calls for proper crypto regulations as Bitcoin shoots beyond $20,000

Powell reckons that a lot of thought must be put into regulating crypto activities. The crypto market’s bullish stint coincides with Powell’s speech “on opportunities and challenges of the tokenization of finance,” at the Louvre Museum in Paris.

Read more

Intel's Mobileye extends Geely partnership, TSMC says wafer orders down

Intel's Mobileye extends Geely partnership, TSMC says wafer orders down

As always, a lot is happening this week in the semiconductor space. Despite the continued decline of share prices all around, the major chip designers and manufacturers continue to announce significant moves.

Read more

Forex MAJORS

Cryptocurrencies

Signatures