The S&P 500 (NYSEARCA: SPY)
is the most widely accepted benchmark index representing the U.S. stock market. It is the headwinds and a compass for anyone who owns or trades stocks. The SPY reached an all-time high at $339.08 on Feb. 19, 2020 preceding the coronavirus black swan
plunged shares by (-34%) to $218.26 on Mar. 18, 2020. This was the fastest transition from an all-time high to a bear market in history. Since then, the SPY has managed to rally nearly 62% from the lows peaking at the $295.68 Fibonacci (fib) level
before a rapid plunge back to $278.69 in two-trading days. The significance of this (-17 point) drop may easily go unnoticed in light of this year’s volatility, but it would be a mistake to do so. This was a mere nudge from the sleeping giant that is the monthly 5-period moving average (MA) downtrend powered by a bearish stochastic mini inverse pup. Here’s a lay of the land through a different “lens” so investors and traders can be aware of what lurks ahead for the SPY.
Square Peg into Round Hole
Everyday financial media attempts to explain the reasoning behind the stock market’s move, especially when it’s a large point move. However, listening to financial news networks can be very misleading as price action often precedes the ‘reason’. It’s very much like trying to fit a square peg into a round hole as the narrative shapes sentiment which shapes price until an extreme price move reshapes the narrative. Price often precedes the news so it’s best to also utilize price action interpretation methods known as technical analysis. This is what we employ to truly learn the message of the markets.
The Sleeping Giant Lurks
The SPY rallied up to the $295.68 fib and the monthly 5-period MA post-market on April 29th. The monthly 5-pd MA resistance rejected the break attempt as the SPY began its two-day descent causing a (-17 point) sell-off to $278.69. This caused the daily stochastic to cross down through the 80-band as bears pounced on the downdraft embracing the “Sell in May and Go Away” maxim suppressing the 60-minute stochastic under the 20-band for two-straight days in the weekly close on May 1st. On the following Monday and Tuesday, May 4th and 5th, the “experts” on the financial networks were very bearish in their tone talking up the extended recession and vanilla safe comments. The SPY spent all day on Monday consolidation at the $280 range and exploded through the $288.59 daily market structure low (MSL) to squeeze back up to the weekly 15-pd MA at $289.10 setting up for a potential showdown again with the “Sleeping Giant” monthly downtrend at the 5-pd MA at $291 and 15-pd MA at $295.68 fib.
Bulls Versus the Sleeping Giant
Using the rifle charts on monthly, weekly and daily time frames, we lay out the playing field suitable for swing traders and investors. The monthly rifle chart is bearish with the major resistance at the 5-period MA currently at $291. The bulls have managed to push through all resistances up to that level. Ultimately the showdown will happen to determine the next follow through the direction of the SPY and the U.S. stock markets. The bulls have to break through the monthly 5-pd MA at $291 and then grind through the 15-pd MA overlapping the $295.68 fib. If they can hold above this level into the month-end close, then a melt-up north of $300 is possible
The Bear’s Game Plan
The sleeping giant is the monthly downtrend composed for the 5 and 15-pd MA. The bears will use those monthly 5 and 15-pd MAs to deflect the breakout attempts long enough to exhaust the bulls back down to the rising weekly 5-pd MA at the $283.83 area. If the weekly 5-pd MA breaks down causing the weekly stochastic to cross down in combination with the daily stochastic cross down, it will awaken the sleeping giant since the monthly stochastic is already falling with a bearish mini inverse pup. The combination of three simultaneous wider time frame falling stochastic trigger a “perfect storm” breakdown that could collapse the SPY back down to re-test the $263.33 weekly MSL trigger. A breakdown through that area could result is a fast collapse towards the $244.10 daily MSL trigger level.
Best Growth Stocks - Best Stocks to Buy Now
The stock market has been growing since the New York Stock Exchange opened its doors in 1817. Sometimes, a stock will outpace the rest of the market in terms of growth. These skyrocketing securities—or the ones that analysts expect to skyrocket—are called growth stocks.
What Every Investor Needs to Know About Growth Stocks
Growth stocks are a great opportunity for an investor to make money in the stock market, but you’ve got to know what you’re going to buy or sell. A good understanding of growth stocks will help you get there.
At the beginning of a bull market, you can almost choose stocks randomly and find yourself a winner. Now that we are entering the current bull market's ninth year, growth stocks have appreciated considerably. It's becoming far more challenging to find stocks with real opportunities for appreciation.
Growth companies are still largely outperforming their value counterparts in the United States and the rest of the world largely because of low-interest rates, improved corporate earnings, and global economic growth. Over the last five years, the S&P 500 Growth Index has returned 14.22% per year. During the same time, the S&P 500 Value Index returned just 12.94%.
Now that the bull market is now nearly a decade old, stocks have become very expensive. Value investors are largely sitting on the sidelines, and growth investors have a hard time figuring out where the remaining growth opportunities exist.
If you are looking for growth stocks in an increasingly small field, we have identified the 10 best growth stocks to buy right now based on their expected earnings growth over the next several years. These companies are all growing rapidly and will likely see double-digit earnings growth next year.
View the "Best Growth Stocks - Best Stocks to Buy Now".