The SPY continues to stair step higher with prior resistance levels acting as support in classic trending behavior.  On Wednesday the 120 level was taken out and we will now look for support on pullbacks near that level, followed by 119.10 and 118.40.  The bearish argument that it is “up too much” or “volume is low” continues to be irrelevant to a market which wants to continue higher.  Caution continues to be warranted as a deeper pullback could ensue at any time, however there continues to be zero evidence that sellers are very interested.

The criminal always returns to the scene of the crime.  The “crime scene” for the market is rapidly being approached near the breakdown levels from where the major selling came into the market in the third quarter of 2008.  The prior support ~123-125 is also coincident with a 61.8% retracement of the 2007 high to the 2009 low and that is another reason why the market seems to be charging for that level.  Broken support, fibonacci, etc. often becomes resistance, but technical analysis not a science, so remain open minded as the market approaches that level but be aware that other people are also focused on that level.  The true value of technical analysis is to try to anticpate the crowd behavior but to wait for price confirmation before committing to a trade.