The SPY is approaching a pull-back period, which could last a few months into 2Q 2017.
At FinGraphs, we present all charts over 3 investment horizons using 3 indicators for each one of these investment horizons:
Potential Trend: shown by the ‘Bull’ or ‘Bear’ figurines on the upper left side of the chart.
Possible Targets & Timing: targets are shown by the Green, Red or Grey price projection beams. These possible Targets Zones define the potential left in terms of Price objectives and Timing (when the Ellipse at the end of the beam has entered entirely in the chart, potential timing to the objectives has been reached).
Risk assessment: defined by the blue oscillator, the ‘Risk Index’, fluctuating from Overbought to Oversold. When it enters these exaggeration zones and leaves them again, a potential top or bottom is confirmed.
- ‘Weekly’ Left-hand chart, which is updated every week and gives the market perspective over the next few quarters:
Since early 2016 The S&P500 has been in a strong up trend. This strong could be close to an intermediate top: our Impulsive targets up zone have been reached (prices even went beyond them). The possible Timing of this impulsion is near completion as the Red Ellipse has almost fully entered the chart ( Possible Timing, i.e. towards “the red Ellipse”). The Risk Index which is just under the Overbought zone below its last top. This could be showing a divergence with price.
- ‘Daily’ Middle chart, which is updated every day and gives the market perspective over the next few months:
Currently the “Bull” uptrend is still in place (Potential Trend) but some indicators are showing signs of exhaustion. Indeed, SPY has entered the price range of its possible Impulsive Targets up (Possible Impulsive Targets up in ‘green’). Its Risk Index is starting to be Overbought (Risk assessment) . The Possible Timing left (“the red Ellipse”) has entered the chart.
These three indicators express that the uptrend is showing signs of weaknesses but could still extend a few more weeks.
- ‘Hourly’ Right-hand chart, which is updated 8 times a day and gives the market perspective over the next few weeks:
The indicators of the Hourly charts are also showing signs of exhaustion. The trend is still in a potential “Up” (Potential Trend) and there is a bit more impulsive potential up left. Yet, from a timing perspective, the Timing Ellipse (Possible Timing) has almost entered the chart entirely. In addition, the Risk index (Risk Assessment) is Overbought and could soon be reversing down to confirm a top. The Hourly chart could nudge a bit further, yet, over the next week or so it is nearing a top.
Summary for SPY:
Longer term, SPY has been in an impulsive up since early 2016. Looking at the indicator, this potential uptrend is showing signs of exhaustion: a retracement may materialize into the Spring.
Medium term, most indicators are also close to exhaustion, timing however suggests that it may retest up once more over the next few weeks, before starting to consolidate.
Shorter Term, Impulsive targets up and the Timing Ellipse are close to exhaustion and the risk index is Overbought. A Top is approaching. Can it provide the inflection that would help turn the Daily?
Nevertheless, on all three frequencies, Risk/Reward is stretched.
In wishing you outstanding success in your trading, your FinGraphs team.
Why Not Get a FREE Trial of our great Software
FinGraphs is a product by Management Joint Trust SA, Geneva, which offers a system of statistical analysis and automatic interpretations of financial data. All opinions, news, research, analyses, prices or other information in the article above are provided as general market commentary and do not constitute any financial advice.