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Long Trade Idea: SPDR S&P 500 ETF Trust

01/08/2018 3:00 pm EST

Focus: STOCKS

Landon Whaley

Editor, Gravitational Edge

Trade idea: As long as SPY trades above $252.11, then new long trade ideas can be initiated on declines to $264.66, or lower. Depending on how much room you want to give this idea, use a risk price between $259.96 and $252.11, suggests Landon Whaley of Focus Market Trader.

The SPDR S&P 500 ETF Trust (SPY) gained 2.5% in the week ending January 5, and has gained 2.5% for the year.

SPY’s Fundamental Gravity remains bullish because U.S. economic growth continues to accelerate. December’s manufacturing and service sector data confirms the US economy ended 2017 on an upswing. Not only did manufacturing output growth accelerate to its fastest pace in over twelve months, but the labor market continues to grow at a healthy rate.

Economic activity in the manufacturing sector expanded in December and the overall economy grew for the 103rd consecutive month.

Quantitatively, SPY finished 2017 in “sleep” mode based our proprietary momentum indicator, Social. However last week, Social showed that SPY has woken up and entered “party” mode once again, which indicates higher prices ahead. Not only that but Barometeric, our proprietary measure of buying pressure, is sitting at the highest level in ten years!


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Behaviorally, investors are not bullish enough, despite the epic Barometric readings. Institutional investors have the lowest long exposure to the S&P 500 (SPX) in over one year, and that exposure is continuing to trend lower. Not only that, but investors are close to being short the Nasdaq 100! Clearly these folks don’t understand the power of the Fundamental Gravity.

There is nothing currently standing in the way of this bull market. All three Gravities are bullish, and so is our bias.

Trade idea:

As long as SPY trades above $252.11, then new long trade ideas can be initiated on declines to $264.66, or lower.

chart

Depending on how much room you want to give this trade idea, use a risk price between $259.96 and $252.11. If SPY touches your risk price, even for a second, then you should exit any open trades.

If the trade moves in your favor, then you could consider using the price range between $273.11 and $277.66 as your profit target.

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