Week Ahead: Stock ETF Chart Analysis - SPY, IEV

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Mar 09, 2015
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Week Ahead: Stock ETF Chart Analysis - SPY, IEV

Stock markets in most of the regions around the globe have strengthened from positive trends in the underlying economy. Of course, trends in each regional stock benchmark with have its own set of unique characteristics, so it is important for investors to assess the individual price activity that is present in each location in order to identify where the best opportunities lie. From a fundamental perspective, there are some clear differences in what is likely to occur in the US and Europe.

For example, if we start to hear renewed speculation that any debt-ridden members of the Eurozone will be forced to exit will not be positive for assets like the iShares S&P Europe 350 Index (IEV, Financial). This is one of the factors that investors will need to be watching when establishing long-term positions. “It is true that the trajectory has been positive this year for stock benchmarks in to the US and Europe,” said Michael Carney, markets analyst at Teach Me Trading. “But this does not mean that each stock index can be assumed to continue trading in lock-step with its regional neighbors.” For these reasons, it is important for traders assess each index on its own merits. Here, we will look at the latest technical developments in the iShares S&P Europe 350 Index and the SPDR S&P 500 Trust ETF (NYSE: SPY).

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SPDR S&P 500 Trust ETF (NYSE: SPY)

Critical Resistance:212

Critical Support: 198

Trading Bias: Buy on Dips

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S&P 500 / SPY - Stock Trading Strategy: Prices are starting to roll over from elevated levels but the overall momentum remains positive. Look to buy dips into support at 198.

SPY is still in the midst of a major bull run but we are starting to see prices roll over after hitting its most recent round of all-time highs. There is little reason to expect a significant bearish reversal any time soon, but investors should wait for better prices before getting long again. The first level to watch can be found at 198, and this provides a good risk to reward opportunity for newly bullish traders.

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iShares S&P Europe 350 Index (NYSE: IEV)

Critical Resistance:45.50

Critical Support: 38.30

Trading Bias: Buy Breakouts

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IEV Europe ETF - Stock Trading Strategy: Prices are now coming into major resistance levels that can be used for buy positions if broken. Look to buy breaks of 45.50.

IEV is looking somewhat different in terms of its overall structure. The ultimate bias could be considered as bullish but under different circumstances. For example, the trend in SPY is bullish and can be used for buy on dips strategies. But when we look at the IEV, the climate is really much better suited for breakout strategies. At the moment, prices are clearly focused on the next resistance level at 45.50, and if we do see a break here we will likely see bullish momentum carry market valuations significantly higher. Indicator readings are also in positive territory, so all of this makes the prospects for a bullish breakout much more likely. Stay on the sidelines until we see a clear break of 45.50 but once this occurs it is time to enter the market long.