SPY Chart – Sitting on Crucial Support

I charted SPY this afternoon when it was trading at $105.33 as it sat at a level of critical technical support.  The two main indicators I like to use that are in play right now are the trend line of higher lows and the 50 day moving average (dma).  The 50 dma and the two lower trend lines are very close to each other.  I drew two trend lines to mark different trends of higher lows.  The longer one starts with the intraday low of March.  The shorter one has been a point of resistance a few times, but for the past three months has acted as support.  They are within a few points of each other now.  Those three combined are key indicators to see support or this little mini-correction could get a lot steeper.

In addition to the moving averages and trend lines, Williams %R is getting close to an interesting point.  I say “close” because I see Williams %R as a better indicator when a stock or ETF pushes it out of oversold rather than just when it enters.  I highlighted the entry points into that lower grey area of oversold for the 14 and 28 day indicators to show how the last eight months have reacted to similar times.  Each one shows SPY move higher soon after that mark.  The unknown is if SPY will stay oversold longer this time than previously.  The canary in the mine might be the trend lines and moving average I addressed in the first paragraph.  Once the direction is chosen, I expect a quick 5% in either direction.  Hold on tight and get your trading fingers ready.  (Give a point or two in either side of my trend lines for my less than precise drawing.)