The Financial Markets are Ending the Week with a Bounce Higher

Tom Gentile

Posted in
Technical Analysis

By: Tom Gentile
January 20th, 2023

2 mins read

Monday, January 16, 2023 was a bullish day for the SPY, (my ETF that I use to analyze my directional sentiment for US equities.

That gave an indication a run towards the recent high for SPY at 410 was possible.

Alas, it did not work out that way as the next three trading days were bearish and a pull back to 390 happened.

390 has acted as a resistance and a support over the date range you see depicted in Figure 1:

Figure 1: 100-day Candle Chart with 10-30-DAY Simple Moving average (SMA) on SPY
Figure 1: 100-day Candle Chart with 10-30-DAY Simple Moving average (SMA) on SPY

With today’s bullish day this is shaping up to be a situation 390 is once again acting as a potential support price for SPY.

I placed a couple of Simple Moving Averages (SMA) on the chart.  I placed a 10-day and a 30-day SMA, (the 10-day in light blue and the 30-day in purple).

One indication of  direction or momentum is given by the SMA cross.  When the shorter=term SMA crosses above the longer-term SMA that tends to indicate a move to the upside is possible.

It works in reverse when the shorter-term crosses below the longer-term.

Simple Moving Averages are a way to visually see trend of a security.  It plots the closing price of a security for x number of days back and then (depending on your software) connects those with a line so we can see trend.

I will have a lesson plan put together in the near future further explaining this, but for right now if SPY follows through on the 10-30 bullish cross we may see US equities, the SPY move higher next week.

Of course, nothing works 100% of the time and it may reverse, but now we visually see what it could do which means if it doesn’t follow through we know how to recognize that and be prepared to trade the other direction.

App: Toms Option Tools

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