Monday Morning Stock Index Check at Midpoint Value Area

Jul 18, 2011: 11:58 AM CST

Monday’s not off to a great start for the triple US Equity Indexes so far.

Let’s take a look at the Dow Jones, S&P 500, and NASDAQ Indexes as they all sit atop the Midpoint or “Value Area” of their 2011 trading range reference areas.

Let’s start with the Dow Jones, which shows a “Rising” Range as opposed to the other indexes:

Relatively speaking, the Dow Jones is ‘stronger’ than the NASDAQ or SP500 in terms of the Rising Value Range and the fact that the Dow formed a clear higher low in June.

The key level to address at the moment is of course the key price confluence at 12,300 (simple reference level).

Mainly, we have the 20 and 50 day EMAs flattening between 12,300 and 12,400 as we see a make-shift rising trendline – the “Value” or Midpoint Level – resting near 12,300.

At the midpoint, there is an equidistant (roughly) swing between the rising Lower Support Line (roughly 12,000) which is a confluence downside target, and 12,700 (or even 12,800) which is the Rising Resistance Target.

The simple IF/THEN expectation is to expect a bounce off this level should the market behave as it did with the April swing low into the 12,200 support (rising higher) or a collapse back down to the 12,000 level which wa the outcome from June’s test of this level.

In other words, at this inflection point, you have a chance to play your bias/expectation with low risk here as the price is “Fairly Valued” between the “Expensive” and “Cheap” levels.

See my prior recent update “Use This Reference Chart to Make Sense of the Current S&P 500 Range.”

The post explains the logic of the current Value Area and Structural Reference Levels which are unchanged today.

Speaking of the S&P 500, let’s now take a look at the most recent update to the Trading Range:

Unlike the Dow, the S&P 500 is showing a Sideways Trading Range or larger Consolidation Pattern between the key “Cheap” support at 1,260 and key “Expensive” Resistance at 1,350.

We’re similarly at the Midpoint or “Value Area” at the critical 1,300 reference level.

This level proved support in April and then failed in June.

A failure here suggests 1,270 if not 1,260 will be realized shortly – otherwise, a successful defense here suggests 1,340 will be realized again.

We should have a sense of what to expect if not today, then early this week in regards to the success or failure of buyers/bulls to defend 1,300.

The NASDAQ shows a similar confluence reference level:

A quick check on the NASDAQ shows critical and now obvious support at 2,600; critical/obvious resistance at 2,880; and a Midpoint Value Area at 2,470 (today’s low so far).

As we start the week with a test off key/critical Midpoint Support areas in all three equity indexes, watch carefully how the markets close today (above or beneath these levels) and then the subsequent follow-through action early in the week.

Also keep in mind the big news drivers this week such as the US Debt Ceiling Talks and the European Situation, as any positive or negative major development with these issues will send the market reacting accordingly.

Corey Rosenbloom, CMT
Afraid to Trade.com

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One Response to “Monday Morning Stock Index Check at Midpoint Value Area”

  1. A Quick Intraday Peek Inside the SP500 at the 1300 Level | Afraid to Trade.com Blog Says:

    […] at the 1300 Level Jul 18, 2011: 12:43 PM CST To follow-up with my prior morning post on the “Monday Morning Stock Index Update at Midpoint Value Areas,” I thought it would be helpful to show the current structure of the 1-min chart during […]