Here’s a look at the daily SPY chart with the potential trading range for the next week or so in the yellow ellipse.
We can see that the range is very wide and the 200-day moving average is about to intersect it right in the middle.
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The Yellow arrow points to our stop-loss band for buy and hold investors. We suggest conservative portfolios use the upper red line at 1040 as a potential stop, however the lower red line is the 38.2 retracement of the move from the lows to the recent high. That is the major support if 1040 gives at some point.
For now we are fairly constructive, but the next couple days might see some backing and filling.
Today we pushed above the 200-day moving average which is a very positive sign, but we expect to see some big swings in both directions.
As we discussed on the Research Lab blog, this week we had expected a tradeable bounce and we pretty much got it already.
The 50-day moving average is waiting above as the next big hurdle and then perhaps the thin green line, which is the highs back in January and the potential “left shoulder”.
We are kind of in limbo right now as the recent gains will likely need to be digested over the next few days.
The Wall of Worry contains a heck of a lot of bricks right now, but we seem to be climbing right on up.
As long as the upward sloping trendline is respected, we are somewhat positive on this market.
However we approach each day knowing the bottom can drop out at any time and are prepared with our “stop-loss” range.
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