S&P 500 ETF (SPY):
The 2-year breakout above 304 (11/1/19) is technically significant as this still suggests +56.68 points or SPY target to 360-361 (intermediate-term). Although this is an achievable projection an overbought condition has now triggered a consolidation phase. This correction will help to alleviate an overbought condition and allow for the resumption of the 10-plus year primary bull trend.
The -7.79% correction over the past 4 days has weakened the near-term technical trend of SPY. However, this is still considered a corrective phase within the confines of a sustainable bull trend. The psychological 10% correction from its Feb 2020 all-time high (339.08) or around 305 may become increasingly important in the days and weeks ahead.
Nonetheless, SPY is now approaching another key technical support zone at 309-312 as this corresponds to the pivotal 38.2% retracement from its Jun 2019-Feb 2020 rally as well the extension of the 2-year broadening and/or head/shoulders breakout. A near-term oversold condition is likely to develop as SPY declines toward this key support.
However, in the case of SPY violating 309 this would signal the next SPY decline toward 304-305 (50% retracement from Jun 2019 rally and the pyschological 10% correction threshold), and below this to the crucial intermediate-term support at 300-302 (200-day ma and the Jun 2019 uptrend). SPY must not violate its 200-day ma as this would deepen the sell-off toward 296-297 (61.8% retracement from Jun 2019 -Feb 2020 rally and 38.2% retracement from Dec 2018-Feb 2020 rally). Under a severe correction SPY can fall as low as its 50%-61.8% retracement levels at 284.25 and 271.31, respectively.
On the upside, after the consolidation phase, SPY is expected to resume its primary uptrend to challenge the following key resistances: 320-321 (2/25/20 breakdown), 325-326 (bottom of the 2/24/20 gap down and the 50-day ma), 332.5 (top of 2/24/20 gap down), and then 339.08 (2/19/20 all-time high). Above 339.08 confirms the next sustainable intermediate-term rally to 360-361 to coincide with the 2-year technical breakout projection.
Summarized below are key technical levels for SPY:
Support 1 = 309-312 (38.2% retracement from Jun 2019 rally and 2-year breakout)
Support 2 = 304-305 (50% retracement from Jun 2019 rally and 10% psychological correction threshold)
Support 3 = 300-302 (200-day ma and Jun 2019 uptrend)
Support 4 = 296-297 (61.8% retracement from Jun 2019 rally, and 38.2% retracement from Dec 2018-Feb 2020 rally)
Resistance 1 = 320-321 (2/25/20 breakdown)
Resistance 2 = 325=326 (bottom of 2/24/20 gap down and 50-day ma)
Resistance 3 = 332.5 (top of gap down)
Resistance 4 = 339.08 (2/19/20 high)
Also enclosed are charts of SPY and major S&P 500 sectors including S&P Technology (XLK), Healthcare (XLV), Financial (XLF), Telecom Services (XLC), Consumer Discretionary (XLY), and Consumer Staples (XLP).
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