Securities Research Services

Friday, May 09, 2008

Serious Selling Occuring in SPY

The SPY continues to struggle at resistance. It hasn't yet broken through the near term uptrend channel mentioned in yesterday's report, but it is probably only a matter of time.

As you can see in the chart above, the price is struggling against the long term downtrend line, which also converges at broken support from last January. A large number of investors bought into this market above $142. These same investors, including large institutional players, have been waiting for an opportunity to cut their losses, which means that there is a huge supply of sellers in this area.

The only real question that remains is will we get another minor bounce back to $140-$141 that fails, or will the near term uptrend fail here?


It's unclear whether a price failure in this area will lead to an extended decline that ultimately takes out $126 or if a failure here will merely lead to a minor decline that soon stabilizes (perhaps in the $137 50-day average area). It is fairly clear though that a serious top was reached this week.

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