I would like to point out 4 significant technical levels on the daily chart of the $SPY in this general area. These levels are labeled 1-4 on the daily chart below.

Numbers 1 & 2 are generally considered bearish.
1- the declining 200 day moving average ~ 126.61
2- the downtrend line connecting the highs from midyear

Numbers 3 & 4 are neutral to slightly bullish.
3- the blue horizontal line shows the closing price of 125.75 on 12/31/10
4- the purple horizontal line represents the Volume Weighted Average Price (VWAP) from the first trading day of the year through current prices ~ 125.23

Looked at together and with a quick glance at the choppy price action, it remains difficult to have confidence in the near term direction of the market.

click charts to expand

Drilling down to the 10 minute chart (below) for the last 15 days of trading action for the S&P 500 doesn’t help to clarify the near term outlook.
If we ask the questions (which we always should)
1- Where has the market come from? The $SPY experienced a low to high rally of ~9% over the last week and a half. While it is possible for the market to still move higher from here, a digestion of those gains through time or by price seems reasonable before the market may find the energy for another push higher.
2- Where does the market have the potential to go before it is likely to find resistance? Looking back up to the daily chart, the declining 200 DMA and downtrend line would suggest the upside is limited from here.