SPY: SPDR S&P 500 BREAKDOWN
The SPY:SPDR S&P 500 Is one of the most popular funds on the market. It aims to track 500 large and mid-sized US companies that are selected by a committee on a number of factors. It is used as a benchmark to U.S financial market, its volatility and the health of the general economy. We will be spending some time looking at the technical indicators to help us understand where the SPY might be heading.
Relative Strength Indicator
The Relative Strength Indicator (RSI) is a specific indicator that is used to detect if a stock is oversold or overbought. The RSI is calculated using average price gains and losses over a given period of time. The default time period is 14 periods with values bounded from 0 to 100. A reading of above 70 means the stock is overbought highlighting a bearish signal that the stock might fall in price. This is the case with the SPY indicating that it might be overbought, as it is right at the top of the RSI Indicator level at 69 indicating that it is likely to fall in the future. Previously we did similar analysis with Beyond Meat before in order to best understand where the price might head before the stock skyrocketed to where it is now.
Commodity Channel Index
The Commodity Channel Index (CCI) is a momentum oscillator commonly used in technical analysis be investors and analysts alike. It’s used to identify oversold and overbought levels as well as having the ability to identify possible trend reversals and trend continuations. Originally used for identifying trends it has continued to prove much more useful when looking at financial instruments. The CCI measures a commodities variation from its statistical mean, in other words a commodities change in price compared to its average change in price. Typically this results in a value between 100 and -100, when a value is larger than 100 this usually indicates an overbought signal and -100 an oversold signal. As it is in this case the CCI is above 100 potentially indicating an overbought signal and a new bearish trend. Many stocks are currently being shorted on the market and as a result we’ve complied a list of some of the most interesting here.