Day Trading Economic News Analysis: S&P 500 May 21, 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 Thursday the US equity indexes continued it’s May sell off 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. After a three day sell off there could be a possible rally due to options expirations tomorrow as well as traders and investors getting out of their short positions prior to the weekend.

The S&P 500 index on the 5 minute chart fell for the third straight session today. Commodities are weaker due to the events listed above as well as a possible slowdown in China will drain global growth. Today jobless claims were released and a jump from 25k to 471k didn’t encourage the US equity markets.

We have told our readers before the S&P 500 is currently undergoing a correction. On the daily chart of the S&P 500 we are currently trading below the January 2010 support level of 1121.

Currently the index is below the 200 day moving average on the daily chart. 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. We had a three day sell off in equities as we approach Friday’s trading day. Expect a mini rally due to options expiration tomorrow.

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.

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 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

1101: 200 day Fibonacci moving average on 5 minute chart

1100: Natural Resistance Level

1096: 144 day Fibonacci moving average on 5 minute chart

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

1117: 144 day Fibonacci moving average on daily chart

1085: 200 day Fibonacci moving average on daily chart

Friday Economic Calendar:

No Economic Numbers Scheduled

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