Day Trading Economic News Analysis: S&P 500 May 20, 2010

Understanding the direction of the market as well as the economic activity will lead you to profitable trades. Keep up with our live news feed and the trend with Tradermongers.com!

S&P 500 Pivots

On Wednesday the US equity indexes strongly supports the ‘Sell in May’ philosophy. All the major indexes were down for the day amplified by the European debt crisis, the oil-spill in the Gulf, and the recent 1000 point crash in the Dow Industrials. Commodities are taking a hit as copper is going lower and gold losing its shine, which was down $21.00 during the last trading session. This growing slide in commodities reflects deflation risks, which means borrowing and spending are discouraged. Yesterday the FOMC minutes revealed a hold approach for assets until economic recovery grows.

Gold hit a record price in dollars of $1,249 last week. Gold imports have been increasing in India prior to April and May as they prepare for a million wedding ceremonies to be held during that time period. Crude oil is finding similar wear as it is trading around $71 a barrel with the stronger dollar reaching near six-month lows, ahead of the summer driving season. According to the editor of the Gartman letter, Dennis Gartman stated that crude oil is falling 25% faster than gold.

The S&P 500 index on the 5 minute chart shows a downward trend on Wednesday trading below Tuesday’s low of 1117. The S&P 500 is also trading below the 200 and 144 day Fibonacci moving averages of 1120 and 1118, respectively.

We have told our readers before the S&P 500 is currently undergoing a correction. The seasonal trading strategy of ‘Sell in May and go away’ is currently strong. On the daily chart of the S&P 500 we are currently trading below the January 2010 support level of 1121. Expect the S&P 500 to find resistance breaking between 1117 and 1120 area as it is below the January 2010 pivot level of 1121. Use the summary of technical levels below as guidelines for trading.

The market volatility index (VIX) measures option activity within the market and is widely used tracking the S&P 500. Increasing volatility implies pessimism within the market and stocks sell off as traders and investors are seeking protection for their assets instead of risks. Traders and investors are retreating from the markets and finding safety and protection within the dollar. Currently the VIX is above the 144 and 200 day moving averages on the daily chart. As long as we stay above this level expect pessimism as we approach the slow summer months.

Summary of Pivot and Technical Levels:

1219: S&P 500 52 Week High

1150: Natural Support Level

1120: 200 day Fibonacci moving average on 5 minute chart

1118: 144 day Fibonacci moving average on 5 minute chart

1127 – 1141: Major resistance level for the S&P for January 2010

1118: 144 day Fibonacci moving average on daily chart

1085: 200 day Fibonacci moving average on daily chart

Thursday Economic Calendar:

Jobless Claims / 8.30 EST

Leading Indicators / 10.00 EST

Philadelphia Fed Survey / 10.00 EST

Natural Gas Report / 10.30 EST

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