Analysis for Short Term Option Trading!
The SPY has started to turn down on our long term chart, but it has yet to identify itself as in a bearish pattern now. Until its drops below the ‘50’ mark, we are still in a bullish move, so we will see what the weeks ahead hold. But a long term pullback could be significant if it does take place.
The SPY has just recently pushed off the upper band. Still, the next step is to see if the stock will stay above the middle band, or use it as its support level. A full push through to the bottom band is a sure sign of the bearish down turn. We are in the beginning stages of defining if we are turning or not.
The SPY has steadily moved down week by week on the Histogram. Breaking through that ‘0’ line has always been significant for the weekly chart. As we get closer, this is one thing we need to watch.
China's weekend reform of its currency regime nails shut the coffin on the last remains of doubt about whether the world's second biggest economy has successfully steered a course past a hard economic landing.
Investors were questioning whether the worst sequential slowdown in China's economy since the 2008-09 global financial crisis could enter a sixth quarter after data on Friday revealed the weakest three months of annual growth in three years and a run rate below the official 7.5 percent 2012 target.
Shifting the yuan trading rules is about the strongest signal Beijing could give that growth downside has diminished and potential pitfalls are manageable. Few reforms are as replete with risk as tinkering with the currency because faith in its soundness directly correlates to economic stability.
"You have to put Europe, Spain and Italy, on any 'watch list' at this point. That may even be more important than earnings," Massocca said.
The data will also get plenty of scrutiny next week for signals on the U.S. economy's health after a weaker-than-expected payrolls report during the Good Friday holiday cast doubt on the strength of the recovery.
Economic indicators due next week include the Empire State and Philadelphia Federal Reserve's manufacturing surveys, retail sales for March, housing starts and existing home sales.
"It will be interesting to see if this is the beginning of a soft patch, if this unemployment number is a harbinger of more," said Stephen Massocca, managing director of Wedbush Morgan in San Francisco.
The March nonfarm payrolls report, which was released on Good Friday when the cash U.S. stock market was closed, showed just 120,000 jobs added last month. That figure fell far short of the forecast for 203,000 new jobs and raised questions about whether the recovery in the U.S. labor market was stalling.
Sasaki of PineBridge Investments pointed out that "employment's been under everybody's watch since last Friday. We still continue to see improvement. We believe it was a hiccup but in aggregate, we think the economic recovery is still continuing to improve."
But even if earnings are solid and data shows improvement, markets could be susceptible to further losses if more signs of fiscal distress in the euro zone emerge.