Day Trading Economic News Analysis: S&P 500 July 8, 2010 Consumer Credit

Day Trading Economic News Analysis: S&P 500 July 8

, 2010 Consumer Credit

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 market pushed higher with the anticipation of the upcoming earnings season pushing the Dow Industrials above 10,000. The Europeans released the results of their bank stress tests relieving some worries and pushing the euro into a 6-week high against the dollar. Yesterday Barrons mentioned the euro positively as they see a rally within the currency. The falling dollar pushed crude oil futures higher along with stocks as traders and investors switched from cash to equities.

The US futures opened above Fibonacci moving averages (8 21 55 144) in the morning and stayed above them as it broke through yesterday's previous high and the 1050 resistance level. Breaking through two pivot levels gave a confirmation that we were in a rally.

The S&P is currently above the pivot level of 1050 however still below the 200 day moving average of 1086 on the daily chart. The NYSE Euronext indicated 6.9% decline in trading volumes compared to last year. Especially due to the low volume summer months we do not believe we will break through the January 2010 which starts around 1025 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.

Tomorrow the Forex markets may watch the Bank of England and the European Central Bank interest rates announcements. On the US economic front watch out for weekly jobless claims and natural gas report as well as the consumer credit numbers in the afternoon.

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