Stock Trading – Technical Analysis

TraderMongers Day Trading Economic Analysis: August 11, 2010 Jobless Claims

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S&P 500

Slowing growth in China and flagging US recovery as well as the Federal Reserve pledging to buy more Treasurys to keep the economy recovery on track brought the markets down the day after the FOMC Announcement.

Historically August is the weakest month of all seasons as many institutions, investors, and traders are away during the month of August on vacations before their children go back to school in September. We have stated to beware of rallies as the middle of August seems to be stronger than the beginning and the end according to the Stock Trader’s Almanac.

Traders seem to sell before the weekend and follow the direction of the foreign markets after they trade on Monday. However if the markets are lower during the week then traders may buy back their shorts before the weekend so we could expect a rally on Thursday or Friday. Currently we are trading below the 1100 level on the S&P. Last week we had a hard trouble breaking through the January 2010 resistance levels due to thin August volumes.

On the daily chart the S&P is behaving exactly as predicted. It rallied to the 1125 level which begins the January 2010 resistance then due to thin volume fell threw between the 144 and 200 day moving averages. We expected August to trade below this level due to lack of volume and uncertainty within the markets including the China slowdown, upcoming elections, and weak labor market.

The Market Volatility Index or VIX track prices that investors are willing to pay for options on the S&P 500, usually to protect themselves against declines in stocks. Currently the VIX trading at the 144 and 200 day moving averages indicating more risky approach towards investments and assets. The thin trading volume in August magnifies moves on the VIX so markets could be less liquid markets than fear-driven.

The Chicago Board Options Exchange (CBOE) Market Volatility Index 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 when the index is trading above 30.

 

Summary of Major S&P Pivot Levels

1219: S&P 500 52 Week High

Technical Levels Natural Support and Resistance

1125: January 2010 Resistance Level

1100: Natural Support Level

Technical Levels 15 Minute Chart

1120: 144 Day Fibonacci Moving Average on 5 Minute Chart

1118: 200 Day Moving Average on 5 Minute Chart

Technical Levels Daily Minute Chart

1102: 144 Day Fibonacci Moving Average on Daily Chart

1091: 200 Day Moving Average on Daily Chart

Daily Economic Calendar

Jobless Claims / 8.30 EST

Natural Gas / 10.30 EST

 

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About the Author

Shamim Ziyaaudhin is one of the editors of TraderMongers.com a one stop trading news feed source for worldwide traders and investors. Their philosophy is to establish the standard for providing market news feed that is comprehensive, accurate, and concise. Providing technical and fundamental trading setups, economic numbers, and calendar events throughout the trading day. Shamim has a Masters in Business Administration from Fairleigh Dickinson University and holds a degree in Psychology from Rutgers University. Click here to subscribe to Tradermongers Live News Feed

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