Day Trading Economic News Analysis: S&P 500 May 24, 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

Many traders and investors covered their short positions on Friday before the weekend rallying the US equities markets. The switch from cash to equities also helped the euro strengthen. However disaster still looms over the euro regardless of Germany offering a bailout package up to $750 billion. The 16 member European Union still have high debt to GDP ratios that need to be addressed before the euro has some stability.

China is showing some slowing as rising inflation is causing a real estate bubble. A trade deficit occurred in March as imports are rising compared to exports indicating a slowdown in industrial manufacturing. The slowdown in the global economies as well as falling prices in metals is showing deflation around the world.

The SEC introduced a circuit break rule to prevent the ‘flash crash’ of May 6^th to the S&P 500 equities. If the stock market drops down 10%, trading halts for 5 minutes before resumes. This rule is in effect until December 11^th 2010

The S&P 500 index shows its trading below the January 2010 resistance level as well as the 200 day moving average (1091) on the 5 minute chart. The index has to convincingly break the natural resistance level of 1100 to fully reverse the correction.

The 1085 is a important level on the S&P 500 index as it is currently near the 144 Fibonacci moving average on the 5 minute chart as well as the 200 day moving average on the daily chart. Currently the trend is still heading downwards.

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
1100: Natural Resistance Level
1091: 200 day Fibonacci moving average on 5 minute chart
1085: 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

Monday Economic Calendar
Existing Home Sales / 10.00 EST

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