- 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 or SPY stock 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 also moving higher. This is pretty self-explanatory, the ratio of putts to calls, people buy puts when they are bearish. I won’t add in yet another chart as we still have the SPY to go but suffice to say it is going up.
All this means nothing of course if the actual price is going up and that is exactly what the SPY is doing, going up. 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 wouldn’t it work well to squeeze all those shorts out of their position first, then the SPY can 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 markets 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 fro 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 Strenght 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 thing up for an interesting day on Wednesday, but look for an opening move lower to be again rejected and $441 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 th eshort term key support, intraday.
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