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| Figure 1. SPY -- 6 month daily chart |
The SPY has broken through the 122 level is is looking quite strong on the daily chart. I have been reluctant to trade long side swing trades, because this market has broken out in the past and quickly reversed hard back into the range. I wanted to give the market some time to prove itself and avoid a quick reversal. Ideally I would like to see a pullback to 122 and then buy as the market regains strength. Another scenario I will be looking for is for the market to move through the 126 resistance level convincingly. If either of these two scenarios happen I am going to take some long side swing trades and see if they hold up. Another positive sign I am seeing now is that the 50 DMA (red) now has a positive slope. On previous breaks of the 122 level that moving average was declining.
There is no guarantee of what the market is going to do next. Trading is about positioning yourself when you determine the probability to be in your favor. There is always risk. At least for the time being, the risk looks mitigated, especially if the 122 level holds.
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