SPDR S&P 500 ETF (SPY)
The S&P 500 started rallying in the afternoon and closed at 2,021, ~0.95% higher, on January 29, 2015. The SPDR S&P 500 ETF (SPY) mirrors the price movement of the S&P 500, so it also gained ~0.93% and closed at 202.01 levels. On January 28, 2015, the SPY ETF dropped on the consensus of a disappointing future outlook of big companies like Microsoft (MSFT), Dupont (DD), Procter & Gamble (PG), and Pfizer (PFE). The S&P 500 dropped 30 points or 1.5% to 2027 levels.
The SPY ETF’s rally was supported by the decrease in US jobless claims. The US Department of Labor reported that jobless claims decreased by 43,000 from the previous week to 265,000. This is the lowest level of jobless claims since April 15, 2000.
As SPY gained today, other ETFs like the Dow Jones Industrial Average (DIA), the Consumer Discretionary SPDR (XLY), the SPDR S&P Bank ETF (KBE), the Financial Select Sector SPDR ETF (XLF), and the iShares S&P 500 Index ETF (IVV) also traded higher.
SPY also reacted negatively to the Federal Open Market Committee (or FOMC) meeting on January 28, 2015, and declined. The FOMC said that it would keep interest rates on hold until mid-2015. The FOMC is also concerned about Europe’s high debt and global weakening. So the FOMC will be patient and increase interest rates based on improving economic conditions and a strong labor market.
Estimates of Q4 2014 US gross domestic product (or GDP) data will be released by the US Department of Commerce today, on January 30, 2015. Preliminary consensus shows GDP should increase by 0.5% in Q4 2014 compared to 0.7% in Q3 2014. This estimate should also positively affect the SPY ETF and the S&P 500.
Bullish news and technical catalysts could push SPY to its next resistance level, 205 and 208. Support levels are at 200 and 198, respectively. The relative strength index (or RSI) is in an uptrend, suggesting a further rise in prices. However, the moving average convergence divergence (or MACD) is below the zero line, suggesting a negative price movement.
In the next part of this series, we’ll provide a chart analysis update for the UUP ETF.