Sunday, November 8, 2015
SPY continued it's upward climb this week despite a much stronger than expected Non Farm Payroll report that showed upwards of 270,000 jobs added to the labor force last month. SPY closed at 210.04, up 2.11 (1%) on the week.
Precious Metals collapsed nearly 5% on the news while TLT, a proxy for the long term bond, fell more than 3%.
SPY weekly price continues to ride the four week moving average higher, so it's hard to see a case for any downside correction at the moment.
Over the past several weeks, we've been watching the weekly line chart and noticed that it was facing resistance at the head and shoulders neckline. This neckline was breeched this week and now we are at a slightly higher resistance level, the line connecting weekly high closes. As market patterns generally mirror up and down moves, it's not inconceivable to believe that should price break through this resistance line, it could rally to the 230 level.
At the moment though, I don't see this breakout as likely.
As mentioned previously, volatility, while still at high levels, has reversed and continues to weaken.
Also, the weekly rate of change moving average chart continues to hold at the 0 line showing that the moving average has stopped advancing.
This shows me that on the weekly data, the market, while continuing to eke out small weekly gains, is losing steam.
For me, the biggest kicker is the view of the monthly chart.
I always like to look for the three period test pattern. September's monthly close was at 191.61. We advanced in October and should we maintain current levels throughout November, it will be a perfect setup for a December test of the 191.61 low. That would coincide well with a possible Federal Reserve Rate Hike, which is now becoming more widely expected.
My best guess is that a rate hike would be crushing for the markets, even a token hike.
Currently, I have no positions in the market but will be looking for an opportunity to position myself for next month's potential three month test of the low.