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| SPY May 7 2013 |
SPY has moved back toward the upper channel line. If SPY follows its previous patterns during this uptrend, further daily gains, if any, from this point should be incremental rather than huge up days. May 7 was such a day. We look for a correction down toward the bottom of the channel before we see another huge trend day up. Look for a breach of the 10-day moving average and previous resistance as an indication a correction is in progress.
By any traditional market measure, this market is overbought, but we have to play what we see, not what we expect. Don't short just because valuations are crazy, the policymakers in Washington may be crazier. Protect the downside, but realize this market is moving upwards on what looks like autopilot.
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