Day Trading Economic News Analysis: S&P 500 June 21, 2010

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

S&P 500

The market previously rallied up for the past week in anticipation for Friday's quadruple witching day. Sideways trading occurred as expiration of contracts for all stock index futures, stock index options, stock options, and single stock futures took place.

This Wednesday on June 23rd we have the FOMC meeting, which will give us a direction on where interest rates will be heading. With jobless claims still high and the economy still recovering expect the interest rates to be kept the same however watch for any indication in the wording once the FOMC announcement is made.

Currently, ‘shadow inflation' has been on the rise as airlines are adding additional subcharges, telecommunications are increasing pricing, and banks are adding additional fees for maintaining accounts. This type of inflation will erode potential recovery and consumer savings.

Looking at the technical level on the 5 minute chart for the S&P 500 Index, we are currently below the January 2010 resistance level which starts at the 1125 level. Breaking this level could mean a huge push upwards as investors and traders return into the markets. However summer has already started so be cautious of low volume trading days ahead and expect days with quick rallies followed quick falls.

On the daily chart of the S&P 500, we are between the 144 and 200 day moving averages of 1110 and 1087. Do not expect any major movements unless we break out of this trading range.

-         If we break above 1110 then expect the January 2010 resistance levels starting a 1125 to hold back the market during these low volume summer months.

-         If we break below 1087 then be wary of picking bottoms in the market as we may be expect to go even lower due to the slow down in manufacturing, increasing jobless claims, the European debt crisis, and the fears of another ‘flash crash'

The Chicago Board Options Exchange (CBOE) Market Volatility Index (VIX) 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.

The Market Volatility Index is currently below 30, which usually means that traders and investors are switching from cash to riskier assets such as equities and other financial instruments. If the volatility breaks through the 25 level then the markets show an influx of equity purchases. The 25 level is a major level of support for CBOE Market Volatility Index as it is the convergence of the 144 and 200 day moving averages. This index must break down below 25 or bounce above 30 for the markets to show a consistent momentum and direction.

Summary of Major Pivot Levels

1219: S&P 500 52 Week High

Technical Levels Natural Support and Resistance

1125: January 2010 Resistance Level

1100: Natural Support Level

1075: Natural Support Level

Technical Levels 5 Minute Chart

1115: 144 Day Fibonacci Moving Average on 5 Minute Chart

1114: 200 Day Fibonacci Moving Average on 5 Minute Chart

Technical Levels Daily Minute Chart

1110: 144 Day Fibonacci Moving Average on Daily Chart

1087: 200 Day Fibonacci Moving Average on Daily Chart

Monday Economic Calendar

No Economic Numbers Scheduled – Watch European and Asian Markets

3 – Month Bill Auction / 11.30 AM

6 – Month Bill Auction / 11.30 AM

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