- Market Commentary -

February 10, 2010 (FinancialWire) (By Dr. Joe Duarte) — The SPDR S&P 500 ETF (NYSE: SPY) failed to move above key technical levels on Monday and Tuesday. But by the same token it didn’t make a new low either.

The key levels to watch on the S&P 500 are 1043 as support and 1100 or so as resistance. There are also some significant technical developments to consider here.

One is that the S&P 500 and SPY are making lower highs and lower lows, defining a downtrend. That did not change on Monday or Tuesday. The other is that even though the market is oversold, the 20-day moving average has crossed below the 50-day moving average, and both lines are heading down. Usually, those are signs of further weakness ahead.

That means that we are now in one of those markets where there are three possibilities. One is that we get a retest of the bottom and it holds. The other is that we’ve already had a successful testing of the bottom and we go higher. The worst of the three is that the rally attempt fails again, as it did on Monday, and the bottom near 1043 doesn’t hold.

The great equalizer is volume, which seems to be rising on up days. If that trend continues the market could continue to rise until external events or resistance levels deliver the next opportunity for the current trend to be tested. In other words, confusion remains the most likely emotion triggered by the daily grind in stocks.

[Go to http://www.financialwire.net/?s=joe+duarte to see more commentaries by Dr. Joe Duarte.]

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