The SPY is attempting to stabilize but so far it is unconvincing. A lot of discussion was made of the light volume of the last two sessions and while it is reason for heightened concern about the sustenance of this bounce, we have to remember that the volume was also light due to many participants leaving early for the long weekend. The key level of support this market will have to hold if we are going to see further gains is ~ 108.85, the low of the last two sessions and the approximate location of the rising 5 day moving average. A break below this level (if it holds for more than an hour or so) would likely lead to a test of at least 106.85.
This current rally attempt should be viewed as a bounce within a downtrend which means the emphasis continues to be on risk management through smaller share size and a willingness to bail on longs at the first signs of weakness. If we continue to see upside follow through this week the 112 is where there is likely to be some supply as that is the approximate location of the downtrend line and the level of the volume weighted average price since the market gapped down through the 118.50 support on May 4.