Friday’s ETF Chart To Watch: SPY Running On Empty Ahead Of Jobs Report

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The S&P 500 Index inched closer and closer to the coveted 1,600 level after weekly jobless claims gave the bulls a reason to look forward to today’s employment report. Furthermore, stimulus hopes from overseas added fuel to the rally on Wall Street as eurozone policymakers cut the benchmark rate as expected , bringing it down to 0.50% from its previous 0.75% [Download 101 ETF Lessons Every Financial Advisor Should Learn].

The SPDR S&P 500 ETF (SPY, A) will come under the spotlight today as it looks to settle above a critical resistance level while investors digest April’s employment report. Analysts are expecting for the unemployment rate to remain unchanged at 7.6%, while nonfarm payrolls are expected to come in at 135,000 versus last month’s very weak reading of 88,000.

Chart Analysis

Consider SPY’s one-year daily performance chart below. SPY has been climbing along a steeply rising support level (blue line) since November 16th, 2012; even more impressive is the fact that each correction has been very short-lived, welcoming new bargain buyers after virtually every multi-day pullback. This ETF has showed signs of exhaustion recently, judging by the fact that it has been struggling to settle above $160 a share for the second time since it failed to do so on 4/11/2013 [see How To Hedge With ETFs].

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This ETF has been grinding along resistance at the $160 level all week amid a string of disappointing economic reports, including weak ISM manufacturing data along with worse-than-expected ADP employment numbers. As such, investors looking to enter a long position at current levels should consider waiting to see how markets react to the employment report later today, as it may signal a potential trend reversal for SPY [see How To Swing Trade ETFs].

Outlook

From a technical perspective, SPY has no clear resistance in sight besides settling past $160 a share; in terms of downside, this ETF has  minor support at $158 a share followed by major support at the $154 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing.

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