The SPDR S&P 500 ETF Trust (NYSE:SPY) gapped down 1.26% to open Thursday’s trading session after the U.S. Labor Department released data showing initial jobless claims ticked lower last week.

From a technical perspective, the SPY was likely to retrace because the ETF was unable to regain the 200-day simple moving average (SMA) as support, which Benzinga said was the most likely scenario on Sunday. The rejection of the 200-day SMA came at the end of the measured move of a head-and-shoulders pattern, which Benzinga pointed out back on Oct. 24.

The SPY Chart: After some morning weakness, bulls came in and bought the dip, causing the SPY to begin to spike higher and almost completely fill the upper gap. If the SPY closes the trading session near its high-of-day price, the ETF will print a bullish Marubozu candlestick, which could indicate the next higher low of the uptrend has occurred and the SPY will trade higher on Friday.

• The SPY’s move higher allowed it to regain the eight-day exponential moving average (EMA) as support. Bullish traders will want to see the SPY close the trading session above the eight-day EMA, to indicate short-term sentiment remains bullish.
• The most recent higher high within the SPY’s uptrend was formed on Tuesday at $402.31 and the most recent confirmed higher low was printed at the $374.13 mark on Nov. 9. For the uptrend to continue, the SPY will need to reach a new higher high over the next few days.
• The $400 mark is a heavy level of both support and resistance and if the SPY can trade up toward the level but not regain it, bearish traders can watch for the ETF to print a bearish reversal candlestick, such as a doji or shooting star candlestick, under the level to enter a possible short position.
• The SPY has resistance above at $394.17 and $400 and support below at $385.85 and $381.30.