The SPY turns 30 this week and celebrated yesterday with a jump above its 200 day moving average. We talk about SPY regularly and it is one of the most traded ETFs on the market. It was originally created to offer an easier way to trade the S&P EMini future contracts but has done significantly more than that.

By gaining popularity it fueled the growth of ETFs and gave trades access to strategies that were previously only available to institutional traders. What used to require a significant amount of capital to trade can now be bought and sold on your cell phone with your lunch money.

Yesterday’s move is a big event as the 200 day moving average is a key indicator used by many traders and many algorithms to indicate or confirm a trend. As a result it can often be a self fulfilling prophecy of sorts. Take a look at the SPY chart:

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You’ll notice that it moved above the 200 day moving average (the red line) last week but it never closed on an up day (green candlestick) above the red line until yesterday. This means it was trying to breakthough but there just wasn’t enough confidence in traders to that it would keep going up to sustain the buying and raise the price more. Yesterday it broke through and pushed above.

This type of move is definitely a short term bullish sign but we have seen the SPY struggle to stay above the 200 in the past. We will be keeping an eye on this move and look at some SPY call options as a way to take advantage of a clear sign.

If you are looking for other ways to spot solid signs of where the momentum is, be sure to sign up for Joe Duffy and Lee Gettess’ webinar this Thursday at 4:30pm. They are know as two of the top experts on momentum patterns and with both of them on the same call it should reveal some powerful setups that you can use. Sign up here.

Keep learning and trade wisely,

John Boyer


Market Wealth Daily