SPY once again has tested new highs and failed at these resistance levels. From the post yesterday we know that over the last two months SPY has rallied around 5% and then dropped 3%. This has formed SPY’s half ass channel that it is now trading in. It’s not the cleanest channel with each high touching the top of the channel, but the general direction of the market has formed pattern that reassembles a channel.
Right now what is keeping SPY at the of its channel is support at 137.71 and 137.86 which it broke yesterday but is above this morning. If SPY stays above these levels the upwards trend near the top of the channel continues possibly even touching the top of it almost around 140. SPY would also have to break above resistance at 138.89. If SPY can’t stay above these levels which is very possible, then a move towards the bottom of the channel looks likely especially with an unfilled gap at 134.85 from the gap up on 7/26.
The pattern on the dollar might give some indication where the market might head. It has been discussed numerous times here but the dollar is moving this market. It goes up the market goes down, it goes down market goes up. The dollar formed a descending triangle over the last two days. Not the biggest triangle but a break of it would give more direction to the market. At this point DX below 82.66 is bullish for the market and above 82.88 is bearish.