What's Going On With The SPY Today?

The markets have been choppy this week and many traders have found it difficult to determine the direction in which the major indices are headed.

On Tuesday the SPDR S&P 500 ETF Trust SPY lost a key level at the $412 mark. Along with a continued fear of inflation, two imminent factors are contributing to the choppiness:

• Monthly vix expiry on Wednesday.
• Monthly options expiry on Friday.

The above factors are creating increased volatility and some bearish pressure as institutions are selling options contracts and deciding whether to — or how to — roll them out into future dates. This often increases trading volume.

With the increased volatility expected to last the rest of the week, technical traders can turn to the chart to determine the key levels on the SPY for clues to short-term direction.

The SPY Chart: On Tuesday, the SPY broke bearish at 2:15 p.m. ET before recovering slightly, but then at 3:15 p.m. dropped 0.58% in a single 15-minute candlestick.

The end-of-day move put the SPY directly on a key support and resistance level at $412 to close the day. In the premarket on Wednesday, the SPY lost the $412 level as support and was trading down near its next support level at around the $407 mark.

Tuesday’s bearish move caused the SPY to lose the support of both the eight-day exponential moving average and the 21-day EMA, which is bearish.

The eight-day EMA has dropped down toward the 21-day EMA, and both are trending at almost the exact same level, which indicates indecision. Bulls will want to see the eight-day EMA continue to trend above the 21-day EMA, while bears will want to see the eight-day EMA cross below the 21-day EMA.

A gap left behind on April 5 is just above the important $400 psychological level. Gaps on the SPY aren’t significant because they are almost always filled in futures trading, but it would be healthy for the SPY to retest the $400 level as support, which would also fill the gap.

Bulls want to see the SPY hold support at the $407 level and bounce. If the SPY could regain the $412 level as support on Wednesday, bulls could feel confident a higher move is in the cards. Longer-term bulls shouldn’t feel discouraged if the SPY continues to drop toward the $400 level, however, because the $400 level has not been back-tested as support yet.

Bears want to see sustained bearish pressure continue to push the SPY lower. If the SPY loses the $407 area as support, panic sellers could push the SPY down to the $400 level in short order.

Bears should expect a bullish bounce at both the $407 and the $403 levels, as support has been found there in the past.

See Also: Facebook And Regeneron Lead The Nasdaq Lower Tuesday

SPY Price Action: The SPDR S&P 500 ETF Trust was down 1.46% at $405.92 at last check.