The SPDR S&P 500 ETF (SPY) remains in an intermediate uptrend. After hitting a low in April, SPY consolidated its gains, broke out, and closed last week at a new all-time high. But now is a good time to evaluate your portfolio to ensure you are not over-invested in equities, writes Bonnie Gortler, CEO of Bonniegortler.com.
MACD (bottom chart) remains on a buy signal, with rising momentum above 0, implying higher prices ahead. The upside projection for SPY 700 remains. However, SPY is short-term extended, and a pullback is possible to test the recent breakout of the channel. A weekly close below 575 would negate the upside projection of 700.
S&P 500 Intermediate Momentum Continues to Rise
Figure 7: S&P 500 Weekly (SPY) and 12-26-9 MACD (Bottom)
Source: Stockcharts.com
Investor sentiment, measured by the Fear and Greed Index (a contrarian indicator), just closed at 78, the highest reading since March 24. The reading closed at Extreme Greed, implying a higher risk of a short-term peak developing before a lower-risk, new buying opportunity emerges.
All in all, market breadth is favorable. Small caps are showing strength and intermediate-term momentum patterns are rising. However, in the short term, sentiment is showing extreme greed. Daily momentum has also slowed, forming potential negative divergences (which suggests caution).
Now is a good time to ensure that your stops are in place if you are a short-term trader, and that you are not taking on more risk than necessary. Remember, you never go broke taking a profit. Manage your risk, and your wealth will grow.
