- SPY stock tries to bounce but fails to convince.
- Investors fear the Fed taper as Wednesday conference is due.
- SPY falls on high volume and bounces on none!
If you call that a bounce, then it is not exactly a reassuring one. “Buy the dip, any dip” has been the theme in 2021, but this one may prove to be one that fools us all and turns out to be a trend not a dip. A new downtrend. It has been a while, but signs are growing that bears may be up and roaming for selling opportunities. All that depends of course on Mr. Market himself – our man Jay Powell. So far he has been a staunch ally to bulls, but tonight the stage is set for taper talk and investors are nervous.
Yesterday’s price action was pretty much non-existant with a tiny $5 range and limited volume. The big volume came on the sell-off, which is never a great sign.
SPY stock news
Some good news though comes from China of all places with word that Evergrande made good on some of its interest payments. Shares of Evergrande listed in Germany are up over 40% this morning on the news. That does remove one of the worrywarts that markets have been stuck on. Now all we need is for our main man Powell to step up to the plate and deliver more good news. Risk assets are already starting to recover in Europe with Bitcoin up nearly 4%.
SPY stock forecast
The mood of the market appears to be more important than underlying data. Arguments will always be made after the price action to justify it. Evergrande has been known about for some time, but the markets ignored it. The same can be said of a potential taper. Now that the mood has turned, however, these arguments are being rehashed as the reason for falls. The Fed announcement will be the test for the market’s mood. We feel the Fed will likely take a cautious, market-friendly approach as this is its track record, and given recent wobbles it will not want to shake things further. The reaction will be key.
For now, the SPY is clearly short-term bearish, trading below the 9 and 21-day moving averages and setting a lower low. The volume spiked on the sell-off on Monday and was low for the bounce on Tuesday. The Relative Strength Index (RSI) is weak, very weak, under 50 but not yet oversold. A retracement to fill the gap at $440 is possible, but SPY does not return to bullishness in the short term until the $448 high from last week is broken. Otherwise, we remain bearish.
The lack of volume between $430 does not increase until our support zone at $416. This is where we currently wait to buy an extended dip.
FXStreet View: Bearish, bullish above $448, neutral $443 to $448.
Read More: Was that a dip or a dump?