NEW YORK (Real Money) -- Is the concern regarding the S&P 500 (SPY) warranted here? Looking at the charts, I'd say short-term concern is obviously warranted and some much longer-term worries are creeping in.
We have to remind ourselves though that we are only 2.5% off the highs right here. So while the last few days or even the last few weeks have maybe felt a bit rough around the edges, this is the same pullback we experienced twice in March. The only reason I mention concern is due to where price has taken us.
For the first time since the lows of March, the SPY is trading below the support levels of the current channel. It doesn't matter when you want to use intraday lows or closing lows for your support line either, as yesterday's move breached them both. If the bulls want to recover price action here, then $209 is the minimum target today; otherwise, they will be hoping support comes in at $208. If we get a close under $208, then I'm looking for a continued grind lower until we reach $205.
The technical picture isn't exactly great here either. Momentum is seeing lows as measured by the Relative Strength Index that we haven't seen since March, even while price is much higher. This is a bit of a bearish divergence, but really more of a leading indicator for me. Given this is a slightly longer term 13-period RSI, a recovery into the high 40's is needed this week for some signs of stabilization and over 50 should bring a few momentum players sniffing around.