Is S&P 500 Buyback ETF SPDR (SPYB) Nearing a Turning Point?

Shares of S&P 500 Buyback ETF SPDR (SPYB) have seen the Relative Momentum Indicator (RMI) climb higher over the past 5 sessions.  When this occurs, traders will be watching closely to see if the price breaks through a key level into overbought territory.  

The Relative Momentum Index was created by Roger Altman and was first published in his article in a1993 issue of Technical Analysis of Stocks & Commodities magazine. Altman described the indicator in the following way:

““the RSI is modified by counting up and down days starting from today’s close relative to the close Y days ago, where Y is not necessarily 1 as required by the RSI. The RSI is released from the arbitrary restriction of comparing consecutive days for price changes” changing the  period to 20 days, but with Y set at 5 instead of 1 makes it  “easier to anticipate tradable reversal points compared with the one-parameter RSI. This modification is called the relative momentum index (RMI), in which momentum is substituted for strength, because a momentum index is usually obtained by creating a moving average of the most recent closing price compared with the close Y days in the past.”

Similar to the RSI, the RMI fluctuates between 0-100, where a reading crossing 70 would indicate overbought territory and under 30 Oversold.  

Now taking a look at how the RSI compares, S&P 500 Buyback ETF SPDR (SPYB)’s 14-day RSI is presently resting at 74.66. The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of stock price movements. The RSI was developed by J. Welles Wilder, and it oscillates between 0 and 100. Generally, the RSI is considered to be oversold when it falls below 30 and overbought when it heads above 70. RSI can be used to detect general trends as well as finding divergences and failure swings.

S&P 500 Buyback ETF SPDR (SPYB) currently has a 14-day Commodity Channel Index (CCI) of 81.13. Active investors may choose to use this technical indicator as a stock evaluation tool. Used as a coincident indicator, the CCI reading above +100 would reflect strong price action which may signal an uptrend. On the flip side, a reading below -100 may signal a downtrend reflecting weak price action. Using the CCI as a leading indicator, technical analysts may use a +100 reading as an overbought signal and a -100 reading as an oversold indicator, suggesting a trend reversal.

Shares of S&P 500 Buyback ETF SPDR (SPYB) have a 200-day moving average of 56.21. The 50-day is 58.97, and the 7-day is sitting at 61.00. Using a bigger time frame to assess the moving average such as the 200-day, may help block out the noise and chaos that is often caused by daily price fluctuations. In some cases, MA’s may be used as strong reference points for spotting support and resistance levels.

The Average Directional Index or ADX is technical analysis indicator used to describe if a market is trending or not trending. The ADX alone measures trend strength but not direction. Using the ADX with the Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI) may help determine the direction of the trend as well as the overall momentum. Many traders will use the ADX alongside other indicators in order to help spot proper trading entry/exit points. Currently, the 14-day ADX for S&P 500 Buyback ETF SPDR (SPYB) is 39.99. Generally speaking, an ADX value from 0-25 would indicate an absent or weak trend. A value of 25-50 would indicate a strong trend. A value of 50-75 would signal a very strong trend, and a value of 75-100 would indicate an extremely strong trend. The Williams Percent Range or Williams %R is another technical indicator that may be useful for traders and investors. The Williams %R is designed to provide a general sense of when the equity might have reached an extreme and be primed for a reversal. As a general observance, the more overbought or oversold the reading displays, the more likely a reversal may take place. The 14 day Williams %R is noted at -24.35. Many consider the equity oversold if the reading is below -80 and overbought if the indicator is between 0 and -20.

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