Stock markets have posted strong rallies over the last half-decade but this year momentum has started to slow in several key markets. One of the best examples of this can be found in the S&P 500, which is still in positive territory but has not done much in the way of bullish movement so far this year. In fact, we can see that blue-chip stocks in the world’s most commonly traded stock index have been soundly beaten by the small cap space. Specifically, the Russell 2000 has outperformed the S&P 500 by more than five to one, and this is an indication that the small cap space is where most of the money is currently being made in equity markets.
For these reasons, it makes a lot of sense to plot support and resistance levels in the SPDR S&P 500 Trust ETF (SPY, Financial), which is the most commonly traded asset that is tied to the price action seen in the S&P 500. In this way, traders can determine whether or not the longer-term trends are still in place and whether or not it still makes sense to establish buy positions in the assets tied to the index. If we start to see breaks of major support region, it will start to make other asset classes look much more attractive for active traders.
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SPDR S&P 500 Trust ETF (NYSE: SPY)
Critical Resistance: 212
Critical Support: 205
Trading Stance: Moderately Bullish
(Chart Source: CornerTrader)
S&P 500 / SPY –Â Stock Trading Strategy: Momentum in the SPY activity has started to slow over the last few months, and this makes long positions somewhat less attractive. The longer-term trend, however, is still bullish so the outlook remains moderately favorable for the ETF.
From the long-term perspective, the uptrend in SPY remains largely intact. But on the negative side we have started to see a significant slowdown in momentum when compared to what was seen over the last few years. This does not necessarily mean that long positions should be avoided, however. It simply means that stop losses and profit targets would likely be kept more conservative in order to prevent unnecessary losses. From a support and resistance standpoint the key levels to watch can be found at 212 resistance and 205 support. Buying into the lower of these levels allows traders to conservatively set stop losses below the psychological 200 mark and still target areas near the highs for the year.
