May 25, 2011
Both the S&P 500 Index (SPX) and its tracking ETF the S&P Deposit Receipts (NYSE: SPY) have closed below a technical support level.
Since reaching new highs back on April 29, both the SPX and SPY have made a series of lower highs and lower lows, creating a slowly descending channel with resistance at the highs and support at the lows.
Monday’s May 24 gap down open broke below the lower support line of this channel for the first time since the April highs. Tuesday’s weakness did nothing to reverse the course of the short-term trend, which is down.
The SPY and SPX are now both below their respective 50-day moving averages.
There is strong support at the prior April 18 correction closing low at $130.56 for the SPY and 1305.14 for the SPX.
Considering this week’s technical deterioration, these initial support levels may not hold. If they do, we will be watching for confirmation from a bullish indicator such as a bullish outside reversal day.
The alternative is likely a trip down to the March 16 correction closing lows at SPY $126.18 and SPX 1256.88
The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy has a position in the S&P 500 SPDRs.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.