Day Trading Economic News Analysis: S&P 500 July 7, 2010 Retail Sales

Day Trading Economic News Analysis: S&P 500 July 7

, 2010 Retail Sales

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

The US markets rallied in the morning following positive trading activity within the foreign markets. However selling started once reality set into the minds of traders and investors that nothing fundamentally has changed within the markets. The debt crisis in Europe, BP oil spill, and the China slowdown. The futures started higher in the morning however it fell short of the 1050 resistance level on the S&P 500. Reality set in once ISM Non-Manufacturing numbers were released after 10am and it was lower than the consensus. Selling took place soon afterwards and the S&P 500 rested just above the 1025 natural support level.

Currently the S&P 500 is trading below the 144 and 200 day moving averages on the daily chart. In late June the market rallied just above the 1025 level however it could not break the January 2010 resistance level and it fell back. Due to the low volume summer months we do not believe we will break through the January 2010 until after the November mid-term elections.

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. 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 Treasuries, gold, and the dollar.

The Market Volatility Index is currently between 25 and 30, which usually means that traders and investors are holding their positions whether it is equities or cash especially with the uncertainty within the global economy.

The markets do not have enough volume to push and stabilize the markets during the summer months and most likely stay between this range for some time. As you can see from the Volatility chart that beginning in May, traders, investors, and institutions started increasing their cash positions and stuck to the "Sell in May" philosophy.

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