SPY’s downtrend continues: How to know when it’s over | Don’t ignore this chart!

What should a trader do when the stock market seems indecisive? Sit back and wait for the market to show you the direction.

This week is filled with earnings from big tech companies, jobs reports and investors eager to hear what Jerome Powell has to say about the possibility of a rate cut this year. So, while you are patiently waiting for the stock market to show its direction, it doesn’t hurt to do some chart analysis.

Get real-time charts here.

Take a look at the SPDR S&P 500 ETF (SPY) daily chart below. We see SPY bouncing off the April 19th low and falling after finding resistance at the 50-day simple moving average (SMA).

Chart 1. Spy’s daily chart. A decline in SPY could push it closer to $470, unless it breaks above its 50-day moving average.Chart source: StockCharts.com. For educational purposes.

Looking at the breadth indicator in the bottom panel, the percentage of stocks trading above their 50-day moving average reached the 50 level and then turned lower, while the S&P 500 Bullish Percent Index is just above 50. Overall, the market breadth is as follows: , meh at best.

Will strong earnings from tech companies help boost stock markets? Probably not enough. Amazon (AMZN) outperformed, and its stock traded higher in the after-hours. AMD also surpassed its profits, but its stock price fell during after-hours hours. The focus will be on Powell when she takes the podium Wednesday.

Three levels to watch out for

Price action is never identical to past action, but it is worth analyzing during the 2023 SPY decline. Applying the percentage change tool from the July high to the October low of 2023, the correction was approximately 10.70%, and five upward waves appeared with lower highs and lower lows. The lifespan of a fullback was three months. Could a similar scenario arise this time? Although no two cases are identical, it can be interesting to watch the price movement unfold.

How to annotate a chart using the Percentage Change tool

• Click Next. Comment Button > Text Icon > Percentage Change
• Drag from top to bottom to see the percentage change.

Take a look at the variety of annotations available on StockCharts.com.

Three key areas to pay attention to are:

• Lowest on April 19, 2024. If SPY falls below this level, we could see a series of lower highs and lower lows.
• Highest on April 29, 2024. A close above this level will invalidate the downtrend condition and reverse the correction.
• $470 level. This represents an adjustment of 10.6%. It is also close to the 50% Fibonacci retracement level.

Looking at the breadth indicators in the bottom panel, both have started to decline since their August peaks. Both broke above the 50 mark almost simultaneously with the stock market rally.

take out

This is a big week in the stock market. It’s best to follow a chart similar to the one discussed here. Download live charts and save them to ChartList. You can also apply similar analysis to indices such as QQQ and DIA and other index ETFs.

If you’re looking to buy in a declining market, wait until the market shows signs of a reversal before buying individual stocks. Always follow price action. This improves your market participation skills, making you a smarter trader.

disclaimer: This blog is for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.