TraderMongers.com: Day Trading Economic Analysis July 14, 2010
TraderMongers.com: Day Trading Economic Analysis July 14
, 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
Yesterday the US trade gap jumped 4.8% from $40.32 billion in April to $42.27 billion in May which is the highest level in 18 months. This increase will cut into second quarter GDP forecasts. However this did not stop traders and investors to switch to riskier assets as the market went higher on the sixth straight day. The dollar declined as investors stepped up and demonstrated willingness to take risk. The futures pushed the S&P 500 higher in the morning and maintained a positive direction towards the close yesterday on the five minute chart.
But a worsening trade gap is a drag on growth. Growth must be sustained for unemployment to decline and payroll numbers to advance. Especially when economic turmoil in Europe, financial oversight and healthcare reform are passed around as reasons that employers are unwilling to take new business risks. So why is the market rallying?
Second quarter earnings season is pushing the market higher. Nobody wants to be short during earning seasons and many traders and investors are covering their positions. The S&P 500 is nearing the 1100 natural resistance level and trading between the 144 and 200 day moving averages on the daily chart. Right now we are seeing a massive short covering during the month of July due to earnings season. Expect August to be a month where volume dries up and short sellers reenter the market.
The Market Volatility Index has been active due to the seasonal selling trend of the Sell in May' philosophy. If the index is above 30 then traders and investors are switching from riskier assets to cash. Lower than 30 especially breaking through the two major moving averages of 144 and 200 means that people are buying riskier assets and financial instruments.
The Market Volatility Index seems to stabilizing after the Fourth of July weekend and the anticipation of second quarter 2010 earnings season. The volatility index is pushing for riskier assets however with the upcoming mid-term elections, uncertainty with European debt, and the Gulf Oil Spill traders and investors are cautious looking ahead.
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.
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
1075: Natural Support Level
Technical Levels 5 Minute Chart
1088: 144 Day Fibonacci Moving Average on 5 Minute Chart
1184: 200 Day Moving Average on 5 Minute Chart
Technical Levels Daily Minute Chart
1102: 144 Day Fibonacci Moving Average on Daily Chart
1086: 200 Day Moving Average on Daily Chart
Daily Economic Calendar
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