On the Lookout to SPY a Turn

Owls looking out

Owls on the lookout, h/t NatGeo

This morning, SPY (S&P 500 ETF) continues its rebound on light trading volume. Buyers are following through from Friday’s strength, extending their immediate-term edge.  But until proven otherwise by price, this may be considered a countertrend rally.  Sellers are laying in wait.

Volume indicates the force behind a price move.  Low volume questions the staying power of this action.  Where can we expect sellers to be enticed?

As you can see on my daily Japanese candlestick chart below, the rebound is approaching the negative influence of lines of average price movement.  Former support (demand) now represents resistance (supply).  A natural 61.8% Fibonacci retracement of December’s drop may also come into play.

Daily candlestick chart of S&P 500

Chart by Steven Sarnoff, h/t stockcharts.com

I spy technical resistance in the SPY at: $258, 261.58-$261.72, and $270.  Underlying support is at: $250-$252, $240-$246, and $233-$236.

Buyers are trying to put in a major bottom.  If underlying support fails to hold, we may see another big leg lower.  If resistance is broken, bulls will be let loose.

Time will tell.

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Best regards,

Steve

 

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