S&P 500 Levels & Analysis 7/21/10

The SPY found aggressive buyers on the gap lower Tuesday morning and the market closed right at the highs of the day.  The short term pattern of lower highs and lower lows was broken and the market also made it back above the 5 DMA.  In order to have confidence in a follow through, we will look for support at 108.00 and more importantly, 107.55  The bigger level of resistance is found at 110, which is the location of the 50 DMA.  A push past 110 would break the pattern of lower highs and lower lows on the daily timeframe and could set the stage for a more powerful rally to develop.