Last week Thursday rocked the bulls hitting stops and making everyone think that was the yearly top, it ended up running the full trading range breaking from a new all time high and falling all the way back to the 20 day but holding. Then Friday it moved wildly after the payroll report in the pre-market but opened at  support and ran all the way back up to resistance near all time highs in that one day as well. So it established our trading range on the daily chart but gave little clues about a future trend. We will have to see which way this range breaks and if QE mania can take us parabolic or we correct after these overbought levels run out of new buyers willing to pay even higher prices.

  1. Our resistance level is $177.64, this has held for 9 days. Below this level we are range bound, a close above means we have a break out and potential move to $180.

  2. Our near term support is the 20 day sma a close below this level and we have a breakdown and potential move to the 50 day line.

  3. The 5 day ema crossed under the 10 day sma for the first time in 21 trading days which is bearish but then quickly recovered.

  4. Be aware that the RSI 70 level has been a concrete ceiling for $SPY for the majority of the year, and it is hard to get a good risk reward to the upside once it gets there.

  5. $SPY has been in a $174.50/$177.50 trading range for 12 trading days. Currently this market is still range bound even though Thursday and Friday didn’t really feel that way with all the momentum and movement.

  6. Remember that volatility spikes usually start at the END of a trend, so the run from resistance to support then back to resistance is not bullish.

  7. Even though Friday had huge momentum and overtook the 5 day ema and 10 day sma it was not bullish for me on my time frame because it was completely an inside trading day not a break out of a range or a new all time high.

  8. We are not bouncing here from an oversold level we are fighting against an overbought level after a great run up. So far resistance is holding. So far there really are not a lot of people interested in holding $SPY above $177.50.

  9. The probabilities here is that we stay range bound and wait for a catalyst to push us out of this range. The risk/reward is still skewed to the downside.

  10. A break out of this range is a close above all time highs or a close below the 20 day that opens us up to a new trend, which I will be following whichever way it does end up going.

 

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