SPY has lost the critical Value Area Low ($686.67) and is trading below the Point of Control ($689.86), confirming that sellers are dominant and overhead supply is heavy. Technicals show a bearish alignment with price below the 20 and 50 period SMAs ($691.47), while the RSI at 42 suggests further downside momentum is building before reaching oversold levels. The "support test" pattern implies a high probability of challenging and potentially breaking the $678.78 support level given the lack of buying volume at current prices.
Despite the immediate weakness, SPY remains in a broader uptrend and is approaching a major support level at $678.78 which could trigger a mean-reversion bounce. The market regime is classified as "sideways," which historically favors buying support rather than shorting breakdowns, and no immediate high-impact catalysts are present to force a liquidation event.
Short SPY targeting a breakdown of support due to loss of Value Area.
SPY has lost the critical Value Area Low ($686.67) and is trading below the Point of Control ($689.86), confirming that sellers are dominant and overhead supply is heavy. Technicals show a bearish alignment with price below the 20 and 50 period SMAs ($691.47), while the RSI at 42 suggests further downside momentum is building before reaching oversold levels. The "support test" pattern implies a high probability of challenging and potentially breaking the $678.78 support level given the lack of buying volume at current prices.
SPY offers a compelling mean-reversion opportunity as it tests major support near $678.78, a level that aligns with previous structural demand. With the RSI cooling to 42.63 (approaching oversold territory) and price trading significantly below the Value Area Low ($686.67), a snap-back rally toward the Point of Control ($689.86) and SMA20 ($691) is statistically probable. The broader uptrend remains intact (YTD +14%), making this a classic 'buy the dip' setup before the next leg higher.
Thesis Competition: BEAR case won (72% vs 68%).