subject: Day Trading Economic News Analysis: S&P 500 June 9, 2010 [print this page] Day Trading Economic News Analysis: S&P 500 June 9, 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
Fears of the European debt crisis continues to mount however many traders and investors believe that theUSwill recover at a much faster pace. Ben Bernanke will be testifying tomorrow before the Committee on the Budget, US House of Representatives however today he mentioned to be cautious on theUSrecovery.' The Beige Book will be released tomorrow however many believe that the FOMC will keep interest rates low for a while. The dollar lost ground to the euro due to purchases of equities that rallied the market.
We rallied above yesterday's 144 day moving average on the 5 minute chart at 1058 so we expect to finish above this level. The S&P 500 took a breather today after two days of declines and rallied near the 200 day moving average of 1062 on the 5 minute. Expect the markets to be in a narrow trading range within these low volume trading months.
We expected the markets will be in a tight trading range between 1075 and 1100 however the lower the indices trend the trading range decreases has well. We now expect to be within a trading range between 1025 and 1075
On Thursday the 1071 level and 1075 will provide adequate resistance levels while the 1050 will provide a natural support level for the S&P 500. The 1071 was Tuesday's previous high and the 1075 is the natural resistance level.
On Tuesday we had a retracement to the 1050 area which we reached in early February. This second attempt could break this area due to the low volume trading during the summer months as well as the issues facing Europe sovereign debt and the BP oil crisis. However we broke through the 1050 level only to rally at the end of the day to 1062.
We are trading below the 200 day moving average on the daily chart (1085) so expect any positive news to be a temporary rally as the volume dries up as me move along towards August the slowest trading month.
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.
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 volatility index is above 30.00 as of so traders and investors may maintain their short positions and retreat to safer assets.
However due to the low volume in the recent rally and liquidation of mutual fund investors due to frightening instances such as the flash crash,' European debt crisis and BP Oil Spill expect volatility will return and traders will prey and make money on both ends. Traders will buy when investors are fearful and sell when they are euphoric and confident.
Summary of Pivot and Technical Levels
1219: S&P 500 52 Week High
1111: 144 Day Fibonacci Moving Average on Daily Chart
1100: Natural Resistance Level
1090: Important Pivot Level
1085: 200 Day Fibonacci Moving Average on Daily Chart
1075: Natural Resistance Level
1063: 200 Day Fibonacci Moving Average on 5 Minute Chart
1058: 144 Day Fibonacci Moving Average on 5 Minute Chart
1050: Natural Support Level
Wednesday Economic Calendar
Mortgage Applications / 7.00 EST
Wholesale Trade / 10.00 EST
Petroleum Report / 10.30 EST
Beige Book / 2.00 EST
Ben Bernanke Speaking / 10.00 EST and 16.00 EST
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