Exchange traded funds indexed to the S&P 500 are nearing the bottom of their recent trading range and a key support level.
SPDR S&P 500 ETF (NYSEArca: SPY) ended with a gain Monday but financial ETFs fell along with Bank of America (NYSE: BAC) and Goldman Sachs (NYSE: GS). [Stock Rally Fades]
“Action on the S&P 500 remains weak. This morning’s sharply higher open was soon met with keen sellers. We remain bearish unless the index can regain a foothold above 1200, which at the moment looks unlikely,” said Tarquin Coe, technical analyst at Investors Intelligence, in a newsletter sent Monday.
He noted the morning’s leaders were last week’s dogs, such as Hewlett-Packard (NYSE: HPQ),while financials and cyclicals were among the weakest stocks.
Worries plaguing stock ETFs include a bank run in Europe, potential dissolution of the euro currency, slowing growth in the emerging markets and a double-dip recession in the U.S. [Stock ETFs Volatile on Laundry List of Concerns]
“A clear support shelf sits across 1100, the bottom of the one hundred point range of the past two weeks,” Coe wrote Monday. “Should that break decisively then be prepared for a lead-balloon drop to 1000, the lows from last summer. Such a move would provide the necessary jaw-dropper of a washout that this market really needs to shake-out the vacillating bulls.”
The iShares S&P 500 (NYSEArca: IVV) also tracks the U.S. blue-chip index. The ETF was down 9.6% year to date as of Aug. 19, according to Morningstar.
