If the SPDR S&P 500 ETF Trust SPY breaks support at the $423 level, it could be the first sign that the market is about to head lower.
The $423 level was resistance for SPY. During market rallies, levels that were previously resistance can turn into support. This is a common and bullish dynamic.
Now that SPY is above $423, many of the investors who sold at $423 regret their decision to sell. A number of these remorseful sellers decide to buy their shares back, but only if they can get them for their selling price. This way they can erase their mistake.
As a result, they place their buy orders at $423. If there are enough of them, it will create a support level. This will set the stage for another move higher.
If SPY breaks this important level, it could be an early sign of trouble ahead.
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