Breakdown Watch In Effect

On Monday the SPY tagged the upper band of its rising wedge pattern and sold off toward daily lows. Yesterday, prices gapped down and traded in the red throughout the day. This has created a potential morning star sell signal on the chart.

What we need now is confirmation. Late in the day yesterday buyers came back in and the SPY continues to trade above support in the rising wedge pattern we continue to track.

What we are faced with here is a market that has extreme overhead resistance, but also a market that has not yet broken down. It would take a close below roughly $140.50 before we can call a clear breakdown in the uptrend. While that appears likely to happen sometime over the next 4-5 trading days it hasn't happened yet and until it does, it's best to avoid aggressive trades on either the short or the long sides.