SPY Chart Review for the Week ahead

SPY continued its climb higher last week after breaking out of its consolidation trinagle and broke out of key resistance at 147.18.  Now SPY is free of much resistance from 2011-2012 and the next resistance levels come from 2007 when the market was it highs.  SPY has now extended its self 2% from its breakout and in month has rallied 8%.  Now SPY nears resistance from almost 5 years ago and has created a tight wedge pattern from the short rally.  So a chance of a pullback based on that wedge break is possible if SPY cannot move above resistance.  Internals have been strong during this rally and the market advanced on better volume so it will be key to watch and see if any move downwards is a pullback or a sell off.  To do this we must look at key levels on the charts.

Resistance Levels Ahead: The first level is the high from Friday at 150.25, this morning SPY is trading below this at 150. A move above this means continued strength from last weeks move.    The 150 will be key support level to watch as it is just a round number level and one the media has been highlighting.  Above this SPY has resistance at 151.40, 152.96 and 156.18.  But really resistance is quite sparse above this level and can be anywhere from  150 to 157.   The 150-150.25 is the real important level to watch, if SPY fails to get above this level in the next few days this rally is over.  Not getting above these levels signals a lack of hesitant in the market as it nears the 2007 levels.

Support ahead:   With the potential for the market to pullback here there a few levels to watch to see if the market is selling off or just pulling back.  The first level is 148.14, this was the breakout level last week and the high from 2012.  A pullback to this level and level that holds looks more like a pullback and could be a safe long entry. Should that level break, 146.21 is a critical level and if SPY moves towards this it should be a warning sign, that the market is going to move lower.  If the market is making a short-term pullback this would be the most likely bouncing point, since it is a 2.5% drop from the highs and would retrace the breakout.  If this level fails it is possible we will see a drop back towards 142.28, the next support would be at 144.74 but the selling would be to strong to hold this level and below this level is the unfilled gap from the end of 2012.

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