SPY: While SPY did end well off the lows on Thursday it still displayed cracks that hadn’t shown up during the rally off the mid April lows, mainly 2 lower lows in a row and 2 red days in a row. Furthermore, SPY went below its previous hours low for the first time since the rally began. While my short trade is based on SPY I prefer to watch the S&P500 for my reference point. I’m focused on SPX 1,650. That’s a nice round number that I feel has psychological implications. If SPX breaks and stays below it at Friday’s open then I’d expect a move towards 1,640 which would translate to low $164′s in SPY. The main trigger for a short trade on SPY is if it can break below its initial 3 min low and 6 min lows by 9:45-9:50. If that can’t happen then I would expect upside or a generally neutral day.
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