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Stock Index Trading Weekly Update - 13th July 09

Stock-Markets / Stock Index Trading Jul 13, 2009 - 01:21 AM GMT

By: Angelo_Campione

Stock-Markets

Best Financial Markets Analysis ArticleCurrent Positioning:
SPY: Nil (Cash)
QQQQ: Nil (Cash)
General Commentary:


While the bears won out this past week, the market has not turned completely bearish at this stage. In fact an upswing from here is not out of the question. Yes the S&P breached the key 880 level, and even dipped to around 870 intra-week but it's still hanging on to support. Also the Nasdaq held its support at 1400 and now has the potential for a rebound

Having said all that, it could simply be another bounce that only lasts for maybe a week or two before heading south again. In order for this assessment to change, we need to see a new high above 950 on the SPX and 1500 on the NDX, and that's difficult to see in this environment.

For the week ahead the bears still have the edge but if they can't get it lower, a decent bounce may follow. If we begin to see a little strength, we'll most likely be adding a long position.

On to the analysis..

SPX Chart - Bigger Picture

The bigger picture is hanging on to support although it's looking precarious. The linear MACD is on the turn and if this crosses lower, we're in for a period of sustained weakness. In other words a continuation of the bear market (and a confirmation that we've been in a big market rally.

SPX Chart - Shorter Picture

The bears got on with the job straight out of the blocks last week and are now finding resistance from the bulls around the 880 level. While 880 is considered to be the main support point, 875 could in fact turn out to be a more critical level.

A close below 875 in the week ahead is most likely to be the final frontier and at this point, the MACD isn't suggesting that 875 will hold. Also, the linear MACD is below zero for the first time since March, unless we see a rise soon, the sentiment will be confirmed bearish and the best that can be hoped for will be 900 as a level to exit any longs you may have.

For the week ahead, support on the SPX is 850 - 875 and resistance 900 - 910.

NDX Chart - Shorter Picture

The Nasdaq finally broke the 50 DMA last week and found support at 1400, while this was a bearish move, the chart is not as bearish as the SPX chart but a close below 1400 will be decisively bearish.

At this point there is potential for a push higher but 1500 would need to be taken out before we can turn truly bullish. Note, the MACD is bearish right now and unless the market rises soon, the bearishness will be confirmed.

For the week ahead, support on the NDX is at 1400 and resistance at 1430 - 1450.

The VIX Picture

The VIX had an opportunity to run away midweek, however resistance was found around 32.5 and we finished the week below the 50 DMA. It's mainly for this reason that we can't say that the bears in the market are in full control because it seems that the VIX has another opportunity to drift lower, which will be positive for the markets.

Notice the MACD now wanting to cross back down, the bulls can't be written off at this point and still have the potential to regain control in the markets.
The VIX measures the premiums investors are willing to pay for option contracts and is essentially a measure of fear i.e. the higher the VIX, the higher the fear in the market place. It tends to move inversely with the markets.

Performance

We're using a starting capital of $5,000 for each market and allocations are based on 25% of this or the remaining balance.

Quote of the Week:
The quote this week is from. Barack Obama, "Change will not come if we wait for some other person or some other time. We are the ones we’ve been waiting for. We are the change that we seek."

Feel free to email me at angelo@stockbarometer.com if you have any questions or comments.

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By Angelo Campione

Important Disclosure
Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.
Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.
In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.
For a complete understanding of the risks associated with trading, see our Risk Disclosure.

© 2009 Copyright Angelo Campione - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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