When we last discussed the market outlook, I was working with the analysis of a continued uptrend in the SPY to be bought at support.
The SPY bounced off the weekly 50 period moving average and 200 day moving averages, but ran out of steam at what is now a descending trend-line of SPY tops since May 2015. That is represented by the descending red line of SPY tops on the chart below.
$207.31 on the SPY (light blue line) will likely bring in some buyers due to lateral price support. If there is no serious battle waged by the institutional bulls at that level, next lower price will likely be another battle at the 50 week and 200 day at around 205.88.
Until we break 204.14, the SPY is still trending upward. A close below that most recent support low, and we will consider the trend to have changed.
There is no doubt that the market is demonstrating fear at this moment. The commodity space has been beaten into a bear market. Many sector ETFs have already broken support and started a trend lower.
In addition to technical damage causing concern, this week on Wednesday, the Federal Reserve will provide more information surrounding expected interest rate rises. Thursday will provide revised GDP numbers that have the ability to start a trend shift lower or bring in the buyers yet again.
What am I doing?
I will risk some cash at support to the long side. If the support breaks I will sell and shift to a short and cash bias.
Very tricky week ahead.