Day Trading Economic News Analysis: S&P 500 May 27, 2010
Tuesday, 7 September 2010
Understanding the direction of the market as well as the economic activity will lead to profitable trades. Keep up with our live news feed with TraderMongers.com!
S&P 500
On Wednesday the S&P 500 index hit an intraday high of 1091 just 1 point above Monday and Tuesday’s previous high of 1090. Multiple attempts to break the 1090 level would be needed to have a confirmation of a rally. Next Monday is Memorial Day weekend so expect a short covering rally to take place on Thursday or Friday of this week.
The S&P 500 index finished at 1068 just below the natural resistance level of 1075. The 1075 level is the convergence of the major of the moving averages (21, 55, 144, and 200) so expect major resistance around this area before a confirmation breakout. Investors and traders maybe covering their shorts the ‘Volcker Rule’ is slowly becoming a reality which limits high-risk trading near July 4th.
Looking at the daily chart of the S&P 500, the index is currently trading below the January 2010 resistance level as well as the 144 and 200 day moving averages. Yesterday we mentioned that the S&P 500 will be range bound between 1175 and 1110 as we head towards the slow summer months. The index traded below this range however rallied and finished below the natural resistance level of 1175.
The Chicago Board Options Exchange (CBOE) Market Volatility index (VIX) measures options activity within the market and is widely used tracking the S&P 500. Increasing volatility implies pessimism within the market and stocks sell off as traders seek protection for their assets.
A common trading strategy for traders and investors includes a VIX level of 30 or above means an immediate switch from equities to cash. Traders and investors are retreating from the markets and finding safety and protection within the dollar. As long as we stay above this level expect pessimism as we approach the slow summer months. Currently the VIX is above the 144 and 200 day moving averages on the daily chart. The index is also slightly above 30 so unless it is below this level do not expect a confirmed rally or upside within the equities market.
As we have stated yesterday as long as we are below the 1075 level on the S&P 500 and the market volatility is above 30 expect choppy trading with no confirmed rallies. We still expect the market to be range bound between 1075 and 1100.
Summary of Pivot and Technical Levels
1219: S&P 500 52 Week High
1115: 144 Day Fibonacci Moving Average on Daily Chart
1100: Natural Resistance Level
1090: Strong Resistance Level
1085: 200 Day Fibonacci Moving Average on Daily Chart
1076: 200 Day Fibonacci Moving Average on 5 Minute Chart
1075: 144 Day Fibonacci Moving Average on 5 Minute Chart
1175: Natural Support Level
Wednesday Economic Calendar
GDP / 8.30 EST
Jobless Claims / 8.30 EST
Natural Gas Report / 10.30 EST
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