We broke through and closed below two significant uptrend support levels today on the E-mini S&P Futures, the SPY and the S&P 500 Index. At the moment, it is not overly alarming because the S&P is not selling off in futures trading, it is actually moving slowly back up toward the uptrend, which is now resistance. We will have to wait and see how this unfolds. Even if we do not move down right away, I think this is clearly a sign of things to come, it provides more evidence that this is indeed a market top that we have been trading in for the past month and a half. If we can move down below $109 on the SPY, we could quickly head down to the $107s. What I have been planning for all along is a return down to $102. The sell off today is a clear indication to me that the path there has begun.
SPY Daily Chart Showing Up Trend
SPY Daily Chart Showing Up Trend Support, Closer Look
Even though SPY broke this up trend support, there is reason to believe the markets will bounce back upwards b4 the real down turn happens. This is because of significant support levels still below where the market is at now. In the case of SPY, $110 marks strong support. I will be looking to buy off that level tomorrow morning if SPY moves down to touch it. I actually expected us to bounce off that level today, but SPY only made it down to $110.08. Close enough, but I wasn't able to buy it there.
If the markets are going to move below $110, it will probably be with a significant Gap Down. The next support will be $109 to $109.30. If we break below there, the markets could see heavy selling pressure and downward momentum should provide the market correction many have been waiting for.
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