Major Indices crossed their 50-day simple moving average
Today was a perfect follow-up from the last few days of last week. I do not think the bulls could have asked for more. Here is how the trending heat map for the major indices looks like after today’s trading:
When everything looks good, I always try to stay calm and see what the problems could be. And by problems, I do not mean on the fundamental or economic fronts. The problems (or risks as I prefer to call them) I am talking about are in the charts.
Let’s look at the SPY daily chart first.
The above is just the last 3 months or so to see the near-term better. The 2 risks I see are:
Today’s market action created a gap below which was not filled during the day. This gap is at 512.55. There is also an unfilled gap from last Friday. That is at 505.89.
The price has overshot above the bullish trending channel that has been maintained over the last couple of weeks.
These are not big issues and may not matter much. The trending has certainly reversed for now back to the bullish side.
However, I call these risks out because stock markets do not keep going up in a straight line. We have had a +3.4% swing up from the Wednesday last week low to the close today. All in a straight line.
So, what do the risks mean? It means we may test a support level below before we continue our way up. The support level could be the 50-day SMA which is currently at around 512.
Or the support level could be around the 510 level which was resistance earlier and now provides support.
So, in a nutshell, the risk on SPY is price tests the 510-512 area before continuing its move higher. Needless to say, that 510-512 area must hold for the bullish move to continue.
Have a good evening.