The SPY Prints Reversal Signal Ahead Of Debt Ceiling Discussions, House Vote: What To Watch

The SPDR S&P 500 SPY popped up above heavy resistance at $420.76 briefly on Tuesday but closed under the level, printing a bearish hanging man candlestick, which Benzinga pointed out was likely to happen earlier that day.

If the hanging man candlestick is recognized, the stock market may retrace on Wednesday, which could instigate at least a short period of heightened volatility.

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With the House set to vote on the tentative deal reached by President Joe Biden and House Speaker Kevin McCarthy to raise the debt ceiling as early as Wednesday, traders and investors will be watching closely to how the agreement plays out and what effect it has on the market.

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The SPY Chart: Although the SPY closed under a heavy area of resistance, the market ETF printed a higher high at the $422.58 level, which confirms the uptrend remains intact. If the SPY reverses lower on Wednesday, bullish traders want to see the ETF form a bullish reversal candlestick, such as a doji or hammer candlestick, above the most recent low of $409.88.

• The lack of momentum to the upside on Tuesday was caused by lower-than-average volume, which is likely due to traders waiting for confirmation on whether the debt ceiling deal will be approved by Washington lawmakers. When that information comes to light, depending on the outcome, momentum to the upside or downside is likely to occur.
• If the SPY forms a lower low and confirms the downtrend, the ETF is likely to find at least temporary support at the 50-day simple moving average. If the SPY breaks higher, bullish traders can watch for the market ETF to ride the eight-day exponential moving average north.
• The SPY has resistance above at $420.76 and $426.56 and support below at $414.89 and $408.

Read Next: Beginner's Guide to Stock Chart Patterns

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