TraderMongers Day Trading Economic Analysis: August 10, 2010 FOMC Announcement II
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S&P 500
Today is the 7th trading day of August and the market has held up well however today is the FOMC Announcement so anything can go. After the Nonfarm payrolls fell by 131k last month, traders and investors are looking for the Fed will need to ease policy to stimulate the economy. Some of these measures include the Fed buying Treasuries and postponing any sales of its balance sheet assets. However the concern over deflationary pressures is a concern for the Fed.
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 rallies as the middle of August seems to be stronger than the beginning and the end according to the Stock Trader's Almanac. Traders seem to sell before the weekend and follow the direction of the foreign markets after they trade on Monday. China brought the Asia markets lower pushing the dollar higher against all major currencies.
Yesterday the market broke through into the January 2010 resistance level. Last week the markets had a hard time breaking through the 1125 resistance level which begins the January 2010 resistance levels. Whether the markets can hold on to this level is another story only to be determined after the FOMC announcement. Not enough volume is expected during the summer months to push the markets above this level especially during the month of August. However with global economy expecting slowdown foreign economies see safety within the US markets.
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 risky 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 15 Minute Chart
1120: 144 Day Fibonacci Moving Average on 5 Minute Chart
1118: 200 Day Moving Average on 5 Minute Chart
Technical Levels Daily Minute Chart
1102: 144 Day Fibonacci Moving Average on Daily Chart
1091: 200 Day Moving Average on Daily Chart
Daily Economic Calendar
FOMC Announcement / 14.15 EST
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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! Visit our blog at Tradermonger.blogspot.com for charts
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!
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!
We mentioned yesterday that there will be resistance around Tuesday's previous high of 1192. The S&P 500 only reached a high of 1190 before being consumed with the consumer credit report declining $11.5 billion in February. The S&P 500 settled at 1182 level after it fell to a low of 1177 breaking last Thursday's previous high of 1181.
On Friday Goldman Sachs was charged by the SEC with civil fraud regarding dealings of the subprime related products. Expect European and Asia markets to be lower on Monday after the aftermath of selling on the US exchanges. The S&P 500 fell to 1192 ending the day near last Wednesday's previous low.
Monday's trading the S&P 500 ended at 1198 below the 144 and 200 Fibonacci moving averages on the 5 minute chart. Recently the volatility index spiked from a 52 week low of 15.23 to 17.34. There seems to be support between 16.50 and 15.50. Breaking these levels will push the S&P 500 index higher.
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