SPY firms for a day
SPY took its decline to the brink of a support break, but manage to firm with a good bounce on Monday. This is enough to stave off a medium-term support break and keep the medium-term uptrend alive. The reasons for support around 108-109 remain unchanged. Support stems from the 62% retracement and the late November lows. Because SPY is based on an index with 500 stocks (S&P 500), I prefer using support and resistance zones instead of exact levels. In addition to support, SPY was oversold almost all last week. The RSI bounce above last week's high shows the most upside momentum since the decline began in mid January.
On the 60-minute chart, SPY gapped up, held its early gains and closed above 109. It has been a while since we saw SPY start strong, stay strong and finish strong. Is this just an oversold/dead-cat bounce or does this signal the continuation of the medium-term uptrend? There was a lot of technical damage done with the decline from 115 to 107.5. I suspect that the first bounce will not hold and there will be another test of support around 108-108.5. Let's see how this first bounce unfolds, if at all.
