Day Trading September 8, 2010 - TraderMongers.com Economic Analysis: Consumer Credit
Understanding the direction of the market as well as the economic activity will lead to profitable trades
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There have been so many fears in the media on a double-dip recession that these "financial journalists" forgot the "Sell in May" philosophy and the low volume trading during the summer months. Now summer is officially over after Labor Day weekend and everyone is partly back to work except those individuals that are part of the jobless claim numbers.
We have a short week ahead of us with foreign Central banks announcing their interest rate policies. Currently the 30 minute S&P 500 chart shows we have recovered near the mid-August 2010 levels. The January 2010 resistance levels starting at 1125 on the S&P 500 will hold off any major rallies until confirmation after November mid-term elections. The Beige Book is due out today as well as consumer credits so expect the markets to trade between the 1090 and 1100 area.
On the daily chart of the S&P 500 the market is trading below the 1100 level. The sharp rally from the first week on September indicates a short-covering before the long Labor Day weekend and ahead of the foreign central bank rates announcements. The markets sold off on Tuesday as upcoming economic numbers needed to be available for institutional traders and investors to find direction. The S&P 500 should be trading between 1090 and 1100 where the majority of Fibonacci moving day averages converges until direction is decided.
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.The VIX peaked during the Sell in May seasonal trend trading above the 30 mark as institutions and investors switched from equities to cash before the summer vacation season.
Currently the VIX is trading slightly below the 144 and 200 day moving averages indicating more risky approach towards investments and assets. The thin trading volume in August magnified moves on the VIX so markets could be less liquid markets than fear-driven. The previous low for the VIX is the 22 area which has been recently broken however this is not confirmation that institution and investors are coming back only that short covering has taken place.
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 Resistance Level
1075: Natural Support Level
1050: Natural Support Level
Technical Levels 30 Minute Chart
1078: 144 Day Fibonacci Moving Average on 5 Minute Chart
1080: 200 Day Moving Average on 5 Minute Chart
Technical Levels Daily Chart
1096: 144 Day Fibonacci Moving Average on Daily Chart
1088: 200 Day Moving Average on Daily Chart
Daily Economic Calendar
Mortgage Applications 7.30 EST
Beige Book / 2.00 EST
Consumer Credit / 3.00 EST
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Day Trading September 8, 2010 - TraderMongers.com Economic Analysis: Consumer Credit
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