• SP 500 Market Analysis 10-25-12

Pre-market update (updated 8:30am eastern):

  • Europe is trading 0.5% higher. 
  • Asian markets traded 0.5% higher. 
  • US futures are trading moderately higher. 

Economic reports due out (all times are eastern): Durable Goods Orders (8:30am), Jobless Claims (8:30am), Chicago Fed National Activity Index (8:30am), Pending Home Sales (10am), EIA Natural Gas Report (10:30am), Kansas City Fed Manufacturing Index (11am)

Technical Outlook (SPX):

  • Despite opening higher, the market quickly gave up those gains, and finished lower for the fourth time in the last five days. 
  • We remain extended outside the lower Bollinger Band. Back in May, we managed to do this for five straight days. Eventually it leads to a hard snap-back, causing bears to be squeezed. 
  • There is strength in pre-market trading, but expect for some resistance to kick in at around 1422, which is the underside of the channel that the market broke down and out of this week. 
  • There’s a trend-line off of the 2011 October lows, that would represent rising long-term support, and today’s that level sits at 1400. 
  • We also broke below the critical 1425 support level. This creates an obvious lower-low in the market, but also a break down and out of current price channel. Very bearish. 
  • Market is short-term oversold. 
  • Volume has been ‘average’ over the past few days. 
  • Price support also exists at 1400.
  • Weekly chart also supports a breakdown in the previous channel, and end to its longer-term uptrend off of the June lows. 
  • 30-minute chart shows a beautiful triple top that has confirmed. 
  • FOMC Statement was a non-event. 
  • VIX is above 18. 
  • Fed’s QE3 launch is going to add a lot of buying power to this market and drive more people out of interest-bearing assets and into equities in search of some kind of return. 
  • One area of concern is the 3 large gaps off of the 6/4 lows that remain unfilled, including 6/6, 7/26, 8/3

My Opinions & Trades:

Chart for SPX:

SP 500 Market Analysis 10-25-12

You Might Like

  • South Korea and its impact on the US stock market.

    South Korea: The Hidden Driver of US Tech Volatility

  • Learn to trade within your means.

    Stop Trying to Hit Home Runs: Start Trading Within Your Means

  • Avoiding traps on stock breakout plays.

    How to Trade Breakouts Without Getting Trapped