That's the question that is going through many trader's minds this week. Should I buy this market, or should I go short this market? At the moment, this market is being driven by perception and sentiment. Eventually that will change and the market will become driven by the direction of the major trend.
Our major trend indicators remain negative on the equity markets. We are also looking at the S&P 500 at the top of the Donchian trading channel. I believe that was the reason for yesterday's sharp move down.
In order for this market to really get going on the upside it needs to clear the highs of 1230 on the S&P 500 in a convincing fashion.
There is so much confusion in the marketplace right now… Interest rates, mortgage foreclosures, contagion in Europe and the occupation of Wall Street. The markets always have numerous conflicting thoughts, but eventually the market figures it out and goes the way it wants to go. Our job here at MarketClub is to recognize those changes and alert you to what we are witnessing.
[Related -Gold hasn’t lost its allure in my portfolio]
Now, let's go to the 6 major markets we track every day and see how we can create and maintain your wealth in 2011.
S&P 500 INDEX
The S&P 500 closed yesterday below the 1205.65 level and we consider this to be a crucial area. Yesterday's close below that area indicates we are going to see further sideways to negative action in the near term. With a Chart Analysis Score today of + 70, we are stuck in a trading range waiting for some news to shake us out of the doldrums. We would not be surprised to see a pullback to the 1120 area. A 61.8% Fibonacci retracement takes the S&P 500 back to the 1130.94 area. Long-term traders should continue to hold short positions in this index.
Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = + 70
Suggested S&P 500 Trading Instruments:
Non Leveraged ETF's: (Long SPY) (Short SH)
2 x Leveraged ETF's: (Long SSO)(Short SDS)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
The downside pressure that we were looking for in this market came to pass today when we traded down to the $30.50 level, basis the spot silver market. This is the lowest level we have seen trade in the last eight days.