SPY Retreats from Highs

Full gap down ends with a daily hammer

Yesterday morning saw SPY open in the Jun 30 gap with an opening continuation into the Jun 29 body. From there we got a quick reversal and SPY rode the EMA9 into the afternoon session where momentum began to wane. Still, buyers kept SPY above the open and were able to dig into the overnight gap before the market closed.

There are two trendlines I am watching on the daily. The one of utmost importance, and the weakest, is the tertiary trendline connecting the 5/24/23-6/26/23 SLs. This TL was breached yesterday as seen in the M5 above but recaptured soon thereafter so the TL remains intact.

The second is rising resistance connecting the 12/1/22-2/2/23 SHs. This TL was broken with volume 38% higher the 50SMA and the fourth consecutive volume increase. The next day, though ending red, saw even higher volume and held the TL which suggested the BO was legit and the TL was broken. But then we gapped back below and stayed there until last Thurs (6/29). Friday saw a FGU with continuation over the TL and with high volume, though not as high as the first breakout. Still, this seemed to be the start of a new wave higher.

We just have not gotten the follow-through. And though we closed yesterday just barely over that TL (average vol) I suspect we need a lower low before we make another attempt to that $440 area.

I have a secondary TL on the 3/13/23-5/4/23 SLs that currently sits around $430. I have ghost TL resistance on the 3/6/23-4/18/23 SHs that was pretty stout until the 6/2/23 FGU where the TL then seemed to act as support. That latter TL sits also around $430. There’s also the 6/26/23 SL of $431.19.

It should be obvious that $430 area is a strong area of support should we get there. And it could be just what the market needs to get more buyers engaged.

The other option is we hold yesterday’s low and make another run to a new 52-week high (currently $444.30). I don’t see this as likely since I just haven’t seen enough evidence to think buyers are really interested here. But neither side really has the momentum. So, perhaps a flush to $430 can get the shorts and profit-takers out and set the stage for a new rally.

I am not looking to short as I see no reason to think that would have any edge. The largest red day we’ve had in weeks was Jun 16 and that couldn’t even take out half the previous day’s range. If SPY can print a large red candle that holds - say we drop today to $430 and Monday we barely put a dent into that candle - then I’ll be more inclined to open shorts. For now, from a swing-trading perspective, I have zero interest.