Stock markets continue to power ahead as the earnings season mostly supported the bullish expectations and macro data is suggestive of a sustained global recovery. We are headed now into the holiday trading season so it will be important for traders to watch their charts as the best indication of what is likely to happen next. “The upside momentum in stock markets is undeniable at this stage of the game,” said Jonathan Millet, technical markets strategist at BitCoin News. “But traders will need to use quantitative analysis methods in their approach in order to avoid buying in at excessively elevated levels.”
Here, we look at the latest trends in the broad regional stock measures: the SPDR S&P 500 Trust ETF (NYSE: SPY), the iShares S&P Europe 350 Index (NYSE: IEV) and in the iShares MSCI Emerging Markets Asia ETF (EEM, Financial).
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SPDR S&P 500 Trust ETF (NYSE: SPY)
Critical Resistance:210
Critical Support: 202
Trading Bias: Bullish on Dips
(Chart Source: CornerTrader)
S&P 500 / SPY – Stock Trading Strategy: Stay on the sidelines until overbought hourly indicators work themselves out. First line of support comes in at 202, followed by 186, these areas can be used for new buy positions.
In the last week, we have seen further continuation of the long-term uptrend in SPY. The ETF posted another record close above the 207 mark and there is little to suggest this will be ending any time soon. But while the bulls are clearly in control, trading in the SPY is all about timing your entries. This means buying into the right support levels, and the 100 and 200-day moving averages have been a good indication of this for most of 2014.
The first area to watch for new buy positions comes in at 202, which is resistance turned support and just above the 200 psychological area. Resistance is hard to find at these levels (given the all-time highs) but we can start to expect buy orders centered in 10-tick increments. Daily RSI is starting to roll over from just above 70, so we could start to see a corrective downside retracement next week.
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iShares S&P Europe 350 Index (NYSE: IEV)
Critical Resistance: 47.10
Critical Support: 41.30
Trading Bias: Looking for Rallies
(Chart Source: CornerTrader)
IEV Europe ETF – Stock Trading Strategy: Buy at current levels in anticipation of further rallies. Look for an extension to at least Fib resistance at 47.10.
The IEV ETF has not been participating in the stock rallies seen in the S&P 500 and the Dow Jones Industrials. But there is clear evidence that this could be changing now that we have broken critical Fib resistance at 44.80. This area marks the 38.2% Fib retracement of the decline from 50.55, so there is scope here for at least a further bullish extension into the 61.8% retracement of the same move. The Daily RSI readings have still not reached overbought territory, so there is plenty of room to extend to 47.10 before we start to see the trend falter.
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iShares MSCI Emerging Markets Asia ETF (EEM, Financial)
Critical Resistance:43
Critical Support: 40.40
Trading Bias: Sideways to Bullish
(Chart Source: CornerTrader)
EEM Emerging Markets – Stock Trading Strategy: Prices look to be stabilizing but we need to see a break of the 100-day moving average in order to accelerate gains.
The EEM ETF looks to be caught in a consolidation pattern, as prices fail to show any of the rel momentum present in the other indices. There is reason to believe that we have found a bottom in the 40.40 area so it is acceptable to be moderately bullish as long as prices hold above here. The Daily RSI indicator is essentially flat-lining but this is still encouraging for those looking to establish smaller long positions.
