January 15, 2010
Both the S&P 500 Index (SPX) and it’s tracking ETF the S&P Deposit Receipts (NYSE: SPY) are at new rally highs, and have closed higher on eight of the last nine trading days.
There is no question that traders and investors are looking at the tea leaves and seeing an improving economy plus higher stock market prices ahead.
But all rallies hit levels of resistance that either stop them or at least result in a correction.
For the SPX, resistance is at 1226.10, the 61.8% retracement level for the entire bear market decline. This is 6.8% higher than Thursday’s January 14 close. For the SPY, resistance is at $122.98, also the 61.8% retracement for the bear market decline, This is 7.0% higher than Thursday’s January 14 close.
In the financial markets, the 61.8% retracement level is almost always tough to surpass. If it is surpassed, the rally typically will move considerably higher. If not, we could see a correction begin at or near these levels.
Disclosure: The www.fibtimer.com ETF Strategy has a position in the S&P 500 SPYDRs.