SPY: Our $416 Buy Alert (Technical Analysis)

Aug. 07, 2022 6:12 AM ETSPDR S&P 500 Trust ETF (SPY)19 Comments

Summary

  • This is a technical analysis article. Seeking Alpha will automatically send our preset, $416, Buy Alert when the SPY price breaks above that price.
  • The jobs report on Friday sent the SPY down to test support at $410, but it quickly recovered because of the strong Demand still showing on the charts.
  • Until this Demand is exhausted, we expect price to move higher, triggering our Buy alert and targeting $420 and possibly $424.
  • Once Demand is exhausted, the chart signals will turn down to test support. Our preset Sell Signal, indicating to us “game over,” is preset at below $404.
  • It is bullish that the jobs report did not go down to $404 to trigger our Sell Alert. Now it is time to retest resistance to trigger our $416 alert.
  • This idea was discussed in more depth with members of my private investing community, Daily Index Beaters. Learn More »

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We have preset Buy and Sell alerts that Seeking Alpha sends out automatically and our next Buy Alert is set to go out when the SPY breaks above $416. That means a bullish, higher-high on the SPY (NYSEARCA:SPY) (Point & Figure chart shown below). We think this Demand is being fueled by good earnings and a roaring economy that is ignoring the signals of a coming recession. This alert, when triggered, will confirm the continued Demand we see on our other charts. We think the next upside targets are $420 and $424.

Will The SPY Go To $420?

Will price reach those targets? If Demand continues strong on the charts, price will go higher. We review these signals everyday and give the answers. As long as Demand is there, we are trading the long side. When the signals change next week or the week after, we will trade the short side. Our "game over" Sell Alert is set to trigger when price drops below $404. However, our daily SPY analysis will tell our readers long before this alert is triggered. The only exception would be a negative surprise.

What Did The Jobs Report Tell Us?

The jobs report on Friday turned the SPY negative on the open. If it were a big, negative surprise, price would have dropped below $404 and triggered our Sell Alert. As it turned out, price stopped dropping at $410 and spent the rest of the day recovering. Considering the continued, strong Demand showing on both the daily and weekly charts, the recovery on Friday was likely to happen.

What Is The SPY Telling Us?

As you all know the SPY is a leading indicator to any recession. This bear market is flashing "recession." Investors feel the pain long before workers are unemployed and consumers stop spending. The Fed knows this and Wall St. knows this. Only the people on Main St. don't know it, because of all the "Help Wanted" signs all over the place.

When Will The Fed Ease?

Why are we watching the jobs report? It only confirms what we already know. The "hope" is that a bad jobs report means the Fed won't raise rates 75 basis points in September. That hope seemed to be scratched by Friday's jobs report. The Fed will not ease based on the jobs report. It will ease when unemployment starts increasing above target levels. It will ease when inflation starts dropping towards the 2% target.

Good News Creates Technical Bounces

Other lagging indicators are corporate earnings. As long as there is full employment, more than full employment, consumers will spend. Corporate profits were not that bad, no recession yet. Inflation is pinching demand by the consumer, but the spending hasn't stopped. Nobody is hurting yet, except the SPY. It knows what the Fed is going to do, namely keep raising rates until inflation turns down or unemployment increases dramatically. That is why the SPY is in a bear market.

Conclusion

We have no problem trading technical bounces, knowing that summer rallies come to an end. This one is close to an end. We know that when our $416 Buy Alert is triggered, the bounce is closer to that end and we don't want to be trapped investing at the top of this summer rally. It's a traders' market. Our sell signals will tell our readers we are switching from long to short. Stay tuned.

Tech Bounce Last Hurrah

SPY Trying To Trigger Our $416 Buy Alert (StockCcharts.com)

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This article was written by

Tom Lloyd profile picture
6.73K Followers
Every day we look for index beaters for investing and trading.

Tom’s book "Successful Stock Signals for Traders and Portfolio Managers" is available on StockCharts.com and Amazon. The StocksInDemand.com system is designed to make money using a combined fundamental and technical grade for each stock. Tom received his MBA in Accounting from St. John's University, where he taught courses on the stock market. He marketed fundamental research, technical research and quantitative research to professional portfolio managers during his Wall St. career. 

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in SPY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: We are not investment advisers and we never recommend stocks or securities. Nothing on this website, in our reports and emails or in our meetings is a recommendation to buy or sell any security. Options are especially risky and most options expire worthless. You need to do your own due diligence and consult with a professional financial advisor before acting on any information provided on this website or at our meetings. Our meetings and website are for educational purposes only. Any content sent to you is sent out as any newspaper or newsletter, is for educational purposes and never should be taken as a recommendation to buy or sell any security. The use of terms buy, sell or hold are not recommendations to buy sell or hold any security. They are used here strictly for educational purposes. Analysts price targets are educated guesses and can be wrong. Computer systems like ours, using analyst targets therefore can be wrong. Chart buy and sell signals can be wrong and are used by our system which can then be wrong. Therefore you must always do your own due diligence before buying or selling any stock discussed here. Past results may never be repeated again and are no indication of how well our SID score Buy signal will do in the future. We assume no liability for erroneous data or opinions you hear at our meetings and see on this website or its emails and reports. You use this website and our meetings at your own risk.

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