Market Index Updates at a Glance

Jun 30, 2007: 9:30 AM CST

It was a wild week of trading, to say the least!  I’m glad we made it to the weekend so we can pause and update our charts and catch a breath!

Next week is expected to be a very low volume week because the 4th of July falls directly in the middle – on Wednesday!  Some people may take off Monday – Wednesday, some Wednesday – Friday, and some may take the entire week.  I’ll still be trading but it will be small positions and I’ll be trying out new ideas I believe.

As of the close Friday, the Dow and S&P remain trapped between their 50 period and 20 period moving averages and appear to have hovered there for the last few sessions.  I’d like to see a clean break before committing larger swing positions – it appears the market is in pause mode (finally) now and volatility shouldn’t pick-up too excessively – if it does, a lot of traders will be caught unawares.  Don’t be lulled to sleep in low volatility environments.

I have purposely zoomed in to two-month charts of these indexes to highlight the contraction in swing and volatility – and to show the ‘trap between the moving averages’.

The Dow and the S&P chart are similar (from a perspective of technical analysis)  in terms of swings and relative price levels:

spx-june-30.jpg

dow-june-30.png

On these charts, we almost set-up a “Sweet Spot” trade.  These occur when a market has had an extended run, momentum divergences are present, a lower swing high forms (initial warning), a lower-low forms, price swings up to attempt a retest of the highs, failure occurs and price takes out the recently established lower low.

In terms of a swing chart perspective, this has not happened, but the market was dangerously close.  Luckily (for the bulls) price only bounced off the recent low and did not create a lower low – rather, we setup a support zone and should be entering a trading range for the time being (which coincides with low volume in the “summer doldrums” which has yet to materialize.

From what I’m seeing, it’s probably best not to put on bold, ‘all in’ swing or position trades just yet, but only you can determine this based on your analysis and your style.

The Nasdaq is also choppy, we was the Russell.

nas-june-30.png

russell-june30.png

Take some time off to do some study and analysis this week… or just take time off and have fun.

I’m a big proponent of the notion that there is much more to life than trading.

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