SPDR S&P 500 (NYSE:SPY) is an ETF closely correlated with the S&P 500 index. SPY constituents include over 500 top companies in the United States, such as Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC), Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), Facebook (NASDAQ:FB),Johnson & Johnson (NYSE:JNJ) and Walt Disney (NYSE:DIS).
Recently, several market analysts have said that the SPY could be making its top with a possible wave of a recession on the horizon. Looking at the chart, several types of analysis could be taken into account. There could be a possibility of market tops, based on the MACD and volume indicator depicting a negative divergence. Prices making relatively new high but both MACD and volume showing the opposite. If we use chart pattern analysis, there could be a possibility of a double or triple top in the making, where a price closed below point A could open the floor below 280 level.
And there could be a sign of the market to make new historical high, based on the EWT (Elliot Wave Theory), chart pattern and the 'golden cross' signaled by the moving average cross-over pointed by the blue arrow. EWT analysis may tell us the current price action is merely a corrective wave and a break above Wave B could propel the price higher, as with the ascending triangle pattern that could support such move. We could see the SPY price to hit beyond the 310 level if price break above Wave B.
The Presidential Cycle may support the bullish outlook of SPY too, as historically market would turned bullish during the pre-election year. Either taking long or short position will highly depend where the next direction of the price would take us. Personally for me, I will watch the market closely and to go long if price break Wave B high (or ascending triangle top) or go short if the price closed below the MA200 or the low of Wave A.
