MDY Chart – Hitting Resistance

I charted the SPDR S&P MidCap 400 ETF ($MDY) on Tuesday, March 9, 2010 after the markets closed and MDY finished the day at $140.30.  Watching the trend line of higher highs that goes back for nearly six months shows MDY is due for a pull back unless it can pull off a surprise breakout.  Best case for MDY is that it inches higher along this trend line or goes sideways while the lower trend lines of higher lows catch up.  I don’t consider that a strong possibility after such a volatile six months where sideways is rarely part of the price action for MDY.

I left the 50, 100 and 200 day moving averages in this chart to show how fast MDY has come off its lows.  Just one month ago MDY was trading below its 50 and 100 day moving averages, but now it’s more than 4% above its 50 day moving average and 7% above its 100 day moving average.  MDY hasn’t touched its 200 day moving average in a long time and would have to fall almost 13% to cross it again in the near term.  The 200 day moving average is moving higher every day, but it’s easy to expect a reversion to the mean and see MDY fall 5-10% to get closer to it.

For an odds play, MDY has finished higher each of the past seven days.  I don’t expect that trend to continue.  I’m not shorting MDY here, but have thought about buying some puts or at least a vertical put spread to gain on the impending dip I’m predicting.