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Bullish Potential for the S&P 500 Index (SPX) and S&P Deposit Receipts (NYSE: SPY)

|Includes: SPDR S&P 500 Trust ETF (SPY), SPY

July 30, 2010

Both the S&P 500 Index (SPX) and its tracking ETF the S&P Deposit Receipts (NYSE: SPY) took it on the chin these last two days, but there are many reasons to be looking for higher highs ahead.

Last week the SPX broke above a declining trend resistance line that has held since late April. This line can be recreated by drawing a line connecting all the failed rally highs from April to mid-July. This break above resistance is bullish.

The 50-day moving average for the SPX has also held well above the SPX since May 5, immediately after the selling began. The SPX is now well above this short-term average.

The SPX reached its 200-day moving average on Monday July 26. This is likely the reason for the selling since that date.

A close above SPX 1114.25 or SPY 111.63 would be very bullish. If this occurs, look for the SPX to quickly test resistance at 1131.23, the prior June rally high.

The ( ETF Timing Strategy has a position in the S&P 500 SPDRs.

Disclosure: The ( ETF Timing Strategy has a position in the S&P 500 SPDRs.