May 14, 2010
Both the S&P 500 Index (SPX) and it’s tracking ETF the S&P Deposit Receipts (NYSE: SPY) have moved higher this week, but both stopped short of surpassing important short-term resistance.
Last week’s huge intra-day selloff took place on the day after both the SPX and the SPY had closed below their 50-day moving averages. The 50-day average is used by traders as a measure of short-term strength for the S&P 500. Above and the markets are in an advance and below there is danger of lower lows in coming weeks.
After the Thursday craziness, both the SPX and SPY recovered to just below their 50-day moving averages. On Tuesday and Wednesday, may 12-13, the 50-day was reached intra-day but the SPX and SPY were unable to surpass them.
On Thursday may 13, the SPX and SPY again moved up to their 50-day averages and did not surpass them. This time they reversed and fell 1% by the close.
Even a close above this average does not make everything well with the stock market, but certainly an inability to close above even this short term average does not bode well near-term for the U.S. markets.
Disclosure: The Fibtimer.com (www.fibtimer.com) ETF Timing Strategy has a position in the S&P 500 SPDRs.