SPY Set to Break Above the 200 Day Average

But will it be able to hold above the bear market demarcation?

As much as I think a pullback would be more healthy at this point, I can’t force the market to conform to my bias.

At the time of this writing, the S&P E-mini futures are up 0.70%. If the futures can hold on, the S&P should open up right at the 200 day moving average. With the market nearing short-term overbought levels, we might have the making of a good short setup. These major moving averages typically provide resistance and support.

But with a lot of traders seemingly sitting on their hands (note the lack of volume), a break above the 200 day average may trigger some buying.

Since May, the SPY has been unable to trade above the 200 day average for more than a week.  With recent highs at $113.30, there is likely to be further resistance even if it can break above the major moving average. Volume has also been extremely light over the past week. All things considered, I’m still not seeing a strong case for a move much higher, although as I mentioned earlier, continued strength may bring some reluctant buyers off the sidelines.

When I look at my breadth indicators, I still see a market that could go either way.

When I look at volatility, I see it near recent lows, but near areas that have typically led to short upticks. If volatility breaks through the areas that have supported it over the last 3 months, we might have conditions that are ripe for a run towards the April highs.

I also can’t help but think that the market may be pricing in a Republican led house.

Next upside target remains $113.30. Downside target is the 50 day average at ~$109.00

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