Last But Not Least, the S&P 500 Index (SPY)

The NASDAQ and SP 600 Small Cap Index broke above the January high last week and they have continued higher this week on solid moves to the upside. Yesterday the S&P 500 index attempted to join the breakout part closing at 1150. This index more than the others seems to be the index of choice to watch on this latest trend off the February lows. It has not been the leader on this move and thus, could be more of an indicator of a top than an indicator for a move higher in the broad markets. This is definitely on my watch list for short term direction.

There are two indicators on the chart above worthy of note. First, the volume shows a down trend since hitting the low in February and second, MACD histogram shows a divergence with price. If we break higher with confidence (higher volume and momentum) this will be worry for naught. But, if the divergence prevails, statistically, there is a higher probability of a test lower before moving higher.

I am not attempting to be prophetic on direction merely state what is on the charts and being prepared mentally is my objective. Do I like the S&P 500 as an investment opportunity on the breakout? Time will tell and it will have to prove itself to me first. What I would recommend is digging into the S&P 500 index and defining what sector(s) are driving the move on this breakout. I would have more interest in them than potentially buying the broader index at this point.

Watch to see how this plays out on the upside or potentially the downside. A pullback to 1130-1135, or even 1115 short term, would be of interest to me as a potential entry point for a short term play. SPY, SPDR S&P 500 Index ETF is the easiest way to play this index.

As with any investment define your strategy and then your entry point, exit/stop and target with every investment. The key is knowing what your goal is and then managing the position accordingly.