S&P 500 - January 14, 2010

A somewhat quiet day!

I have been writing more about NDX recently than S&P. No real reason, I follow both, but trade NDX more actively these days as it seems to offer more volatility than S&P.

Let’s take a look at S&P tonight.

This is a weekly


We started thinking about the possible breakout above 2007 trend line early December as we noted the behavior of RSI

On December 8, MACD looked like it was rolling over. On December 14, I noted a possible MACD hook on the chart. On December 24, we finally got the breakout.

Simple TA, nothing to it.

Since then, S&P has done the most important thing a successful breakout should do: sustained price action above the breakout level.

Index is a bit far from its MAs, and that is usually a point of concern for me. 34 EMA is still below 89 EMA and that, coupled with the previous point, makes me uneasy about a brand new position. On the other hand, all MAs look flattish to up, which is how I like them for support. But, please note that a simple drop to 13 EMA, which can happen, will set a brand new position back for a 100-point clip or so.

Weekly chart is good enough (for now, at least) to offer exiting positions a chance to re-evaluate, and the traders the knowledge that the weekly chart is behind them on the long side.

This is a daily chart


Since November, RSI has not been down to 30. For the same period, 21 EMA has held every dip. Shorter MAs are running away from longer MAs and that increases the probability of a price correction/setback.

Notice how, since early December, every rally has started with a spike and then followed by a tight upward channel. That’s one-day worth of burning shorts combined with off-hour future market action that I wrote about a few days ago.

Yesterday, I said

OpEx week is not over yet. But I find it hard to believe there are many shorts still in the system. If not, then either buyers bid it up on their own, or market finds a price and then drift sideways into expiration.

I guess bulls ran out of shorts to ride up today.

This is 60-min chart


We were prepared for the range resolution in December. Since the breakout, S&P has done quite alright. It retested the top of the range once, offering an excellent position entry. It then cleared and retested our OEW 1133 pivot twice, offering good trading entries.

Notice how 89 EMA has kept the two dips we have had since mid-December.

On this frame, as well, MAs are fanning a bit wide and that increases the risk of going long with a new position. We are half way between two pivots (1133 and 1168) and that makes trading tricky as well.

One disappointment for me, so far, has been the inability of the index to run to its first range target the way NDX did. It still may do it but I am having my doubts.

Regardless, support is 1133, and resistance is 1168.

I have two pinkish lines that I think are important trend lines to watch.

Long term trend is up. Mid-term trend is up. Short term trend is up (a move below 1130 may change that)

Trade Safely!