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S&P 500
According to the Stock Trader’s Almanac, the S&P was up only twice in the last 13 years and the first nine trading days are the weakest of the month. Historically it is the weakest month of all seasons as many institutions, investors, and traders are away during the month of August on vacations before their children go back to school in September.
Beware of August rallies as the middle of August seems to be stronger than the beginning and the end. Traders seem to sell before the weekend and follow the direction of the foreign markets after they trade on Monday.
Last week the markets had a hard time breaking through the 1125 resistance level which begins the January 2010 resistance levels. Not enough volume is there during the summer months to push the markets above this level especially during the month of August.
On the daily chart of the S&P 500 we were trading between the cushion area of 144 and 200 day moving averages as traders and investors are cautious looking ahead especially with the upcoming mid-term elections, uncertainty with European debt, and the current Gulf Oil Spill. Now we have slowly broke out of this area after the European banks passed the stress tests. However as we have stated before the markets will remain trading below the January 2010 resistance levels which begin at 1125.
The Market Volatility Index (VIX) has been active due to the seasonal selling trend of the ‘Sell in May’ philosophy however seems to stabilizing after the Fourth of July weekend and the anticipation of second quarter 2010 earnings season. Currently the VIX trading below the 144 and 200 day moving averages indicating more riskier approach towards investments and assets.
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 Support Level
Technical Levels 5 Minute Chart
1117: 144 Day Fibonacci Moving Average on 5 Minute Chart
1115: 200 Day Moving Average on 5 Minute Chart
Technical Levels Daily Minute Chart
1102: 144 Day Fibonacci Moving Average on Daily Chart
1090: 200 Day Moving Average on Daily Chart
Daily Economic Calendar
Tuesday FOMC Announcement / 14.15 EST
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