S&P 500 Re-Testing Downtrend Resistance From 2007 Peak ($SPY, $TLT, $SPX)

The market (S&P 500, $SPY) is re-testing the ultimate downtrend from 2007 again after correcting 9% (see put activity) from that level in January.  All eyes are on the jobs numbers tomorrow to provide a catalyst for direction.  Also look at the 20 month moving average.  Since 2000, if the S&P broke above/below the 20DMA it determined the next multi-year bull/bear market.  BUT, from 2000-2007 $SPY was riding an uptrend from 1989 which was broken in 2008.

In the end, $SPY (S&P 500 ETF) needs to break through the downtrend from 2007 and above the January 2010 highs to build supportive infrastructure to reach the castle and defeat the King aka the 2000-2007 double top which looks like 1,500.  That's 378 points away and we just added 500 from the March 2009 lows so it could take months or years.  That will be a memorable moment and will probably set the stage for the next 20 year bull market but hopefully it won't be the result of hyperinflation and/or artificial in nature (a breakout but not priced in gold).  If the market fails at this downtrend, the correction from January could proceed and the February lows would be in play (see free MarketClub video: Line Drawn In The Sand For Equity Markets).

S&P 500 40 Year Chart (Courtesy of FreeStockCharts.com)

SPY 22 Year Chart (SPDRs S&P 500 Trust ETF)

$SPY 6 Year Chart

Oh by the way TLT (the long Treasury is testing downtrend resistance in a channel.  It could break out and hit its 50DMA 94.40 if it rides the safe haven trade tomorrow with the US Dollar, or vice versa and hits $87.  Watch the move.  Also The Fly is in 12% treasuries, 35% equities and 53% cash.

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