Oh SPDRs (SPY) what a dangerous web you weave!

The range bound action certainly has been exciting. Just when everyone thinks we are going to break out to the upside institutional sellers step in, and just when it looks like we are going to break down below 1350 and head towards 1300, buyers step in. But this action shouldn't last much longer.

The 100day moving average in the broad market (s&p futures or SPY are mostly what I follow as a proxy) has provided resilient support since its first test early last week. But the more I look at the action, the overall pattern, and Friday's candle, the more I believe this is the "hope" trade and not the "reality" trade. Trade with the trend, as it says above at the top of this blog, is the way to make money. Unless you trade intraday or very short term (as many of us do) the bigger picture is your friend. And right now we are in a short to intermediate term downtrend. Therefore, selling the rallies as I have mentioned here for a while, is the way to go.

Until we get a higher high short term (say around 1370), and then an above average close over the 50day moving average (currently near 1381), the broad market will remain in this downtrend. Additionally keep an eye on both small caps (IWM) and Europe (specifically the DAX). If either of those break up then that would help the bullish argument. But as I expect, if either show additional weakness and start to break down before the s&p does, then look for the broad market to follow. Ultimately 1300-1320 is where the real buying should begin.

I know futures give a better representation than SPY but with a title like that how could i NOT use SPY???