Thursday, September 11, 2014

S&P Refuses to Retreat

Equity markets gapped down at the open this morning but once again, a late afternoon push emerged, rallying the SP500 and its ETF proxy SPY to modest gains today.  SPY closed up 0.23 to 200.30, closing just below the 10 day moving average which posted at 200.35.

During the past three days, price has been consistently supported by the 20 day moving average, shown as the blue trend line in the chart.  Support at the 199 level also marks the resistance area at the end of July, prior to the sudden move down to the 190+ level.

I expect SP to move lower tomorrow, trying to break through to new lows for the move.  This is a typical setup that I look for.  We had a move down into Tuesday and over the past two days, prices retraced.  Then, on the third day, we test the lows.  Usually, at the start of a new move, there is little reason to believe that the lows will hold.  This is especially true since we have not taken out the recent highs from four days ago. 

Should buying come in, as it usually has on any dip, I would expect price to seek the 20 day moving average.  A close at 199.65 or better would be a bullish indication.


On a weekly perspective, should SPY remain below 201.11, it will be the first week in six where SPY declined.  Normal market cycles run from 10 to 15 weeks so one would expect some weakness to show up soon.  The 10-week average for SPY marks at 197.45.  A move down of that magnitude is within the realm of probability.  Overbought/oversold levels tomorrow are 202.70/196.60.

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