Sunday, May 24, 2009

S&P500 Market Commetary - May 24, 2009

Quick thoughts amongst the heat of intense finals...


Looking at the month of may alone, chart can be interpreted bullish short term by trend/pattern short term (short term, into the first month of the 3rd quarter). As before I stated last week I will remain short term bull as long as support at 870-877 holds.

I was playing around with SMA, I found something very interesting, there is short term price support from a cross over of a longer term average under a short term average. The shortest SMA I could get remaining under prices was 30, and the longest SMA I could get with a cross under the 30 SMA was 165; thats quite a range of support. considering the 200 SMA which is quite bearish. This leads me to conclude strong evidence for another move upwards if indeed we have changed trends from bull to bearish.

this possibly may indicate the S&P500 may need another higher low before going down. IF support were not to hold.

Bearish View

Considering volume trends though, and considering a longer time frame for the from about june 2008 ytd, can show a rather bearish interpretation. Depending on your read, one can say the past two weeks are a failure to break resistance at 934-943. Bearish trend in place as confirmed by strong volume seen on may 20th.

Within this time frame on the (on a daily chart) RSI indicating a reversion back to center line, making it harder to use as an indicator. However, from late march onward this is the first time from 1 year ago ytd that the RSI has stayed above 50 and reached near oversold levels at 70.

the MACD is also showing a more bearish indication as the longer term average clearly crossed over the shorter term average and is opening with the past two weeks ending on lower lows.

How would I play out next week if I were trading the S&P500:

Say I am short term bull:

Id probably have a tight stop on 875 (I would be stopped out if prices move about 1.3% downwards). I would probably expect prices to hit 904 which is where I would take profits if this hits before the week is over.

I would be wary to raise my price target higher because bearish volume indications, and short term resistance possibly forming at 910.

If one wanted to hedge this, one probably could buy puts if they had the money, or write puts matching to the stop loss. ( does this even make sense? man i need to review options strategies...)

interestingly enough this purely a technical play, im not considering sentiment, not reading the vix, candlesticks or news, and Im not considering any fundamental changes.


On a side note: after exams I will evaluate my performance for quarter 2 on currencies! Exciting stuff! Unfortunately this will be well into the first month of the 3rd quarter...

until then...

No comments:

Post a Comment

This Blog has been developed by Analyze Capital LLC, and as an independent organization we provide “AS IS” information without warranty. The ideas and opinions expressed by the contributers of this blog are personal and do not represent the actions or policies of Analyze Capital LLC. The contents of this blog do not intend to assert recommendations or to offer advice of any kind. We are not responsible the consequences, be they gains or losses, that may result from using any of the information from this blog.