The SPDR S&P 500 (ARCA:SPY) has been on a steady rise higher over the last week and a half. We saw the SPY hit an all time high of $199.06 on July 24 2014, and then it took a dip of about 4.5%. The move lower in the media was credited to tensions between Russia and Ukraine. However, according to the charts, we see that the move lower came as a result of a key break of an up sloping trendline. This trendline for the SPY was very important as it acted as support on several occasions before giving way and seeing selling pressure ensue.
Traders and investors have again come in to buy the dip after the SPY hit a low of $190.55 and there has been a nice move up since the low was made on August 7. So, as we watch this bounce continue, we see the crucial trendline come back into play and is now acting as resistance for the SPY. This is what we like to call a "backtest" in the world of technical analysis. To sum it all up, if the markets get above the key line, then look for the SPY to move to new highs. If the trendline rejects the move up then there is a very good chance these markets head to new lows.
