SPY Bumps Into Resistance At $420 As It Moves In This Trend: The Bull, Bear Case

The SPDR S&P 500 SPY gapped up to start Friday’s trading session, as the stock continued its ascent from a triangle pattern, which Benzinga pointed out on Wednesday.

The stock market has been trekking higher despite the CME Group Fedwatch tool showing expectations that the Federal Reserve will apply another interest rake hike in June increasing from 10% to 40% over the last week.

Ahead of the Fed’s June 13 and June 14 meeting to discuss whether to hike rates or pause, several Fed speakers have indicated the economy remains too strong and that a pause isn’t yet supported by the data.

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The Fed’s meeting isn’t the only event traders will be watching to determine market direction, however. The debt ceiling crisis continues to weigh on investor’s minds and if lawmakers are unable to come to an agreement before the government defaults on its debt, which could happen as soon as June 1, volatility could increase and the SPY could take a downturn.

When volatility increases, traders wishing to trade it can use MIAX’s SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index (SPIKE), track expected volatility in the SPY over the next 30 days.

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The SPY Chart: When the SPY pushed higher on Friday, the market ETF bumped into resistance near the $420 level and was rejecting the area. The last time the SPY traded above $420 was on Aug. 19 last year, which suggests consolidation under the area may be required before the ETF can gain the strength to burst through the level.

• If the SPY closes the trading session near to its opening price or at the low-of-day, it will print a bearish doji or shooting star candlestick, respectively, which could indicate lower prices will come on Monday. If that happens, bullish traders will want to see the SPY eventually form a bullish reversal candlestick to indicate the next higher low of the uptrend has occurred.
• Bearish traders want to see big bearish volume come in and drop the SPY down under the eight-day exponential moving average, which could indicate the current run higher is over and at least a short-term downtrend is on the horizon.
• The SPY has resistance above at $420.76 and $426.56 and support below at $419.31 and $414.89.

Image by Charles Thompson from Pixabay