Levels to Watch on SPY

In the shortened week last week, the short-term model became extremely overbought. I was away visiting family and did not make any posts. I did not feel in a huge rush to suggest a bearish trade at that overbought signal because the market was able to hold up for a day or two after it became overbought. That can be a sign of underlying strength. We were also far enough off the lows of the previous week, that the market could become oversold above those lows. That is one thing I look for to determine what direction to trade--Is the market above or below the prices that it was at when the last signal registered? So I think the next signal here will be the one to act on.

Right now there is a large unfilled gap down overhead at 90.00ish on SPY. I view that as a major area of resistance. If the market is able to push through that level, then I think there is a good shot it makes it up to the 96.00ish level where there is another gap left unfilled.

If the market fails the next day or so, and goes below Monday's lows, then the next area of major support is an unfilled gap up at 79.65. If we get down to that level this week, then I think that would be a good short-term bullish trade entry point. If accompanied by an oversold reading, I would definitely consider recommending a trade there on SSO.

Pete