Wisdom

"Human emotion is both the source of
opportunity in trading and the greatest
challenge. Master it and you will succeed."

SPX Levels of Support and Resistance

The S&P 500 closed at a crucial point this week.
Resistance is clearly defined at 1295 and Support at 1260.
A break of support at 1260 could bring the index to the 1230ish level, and a break above 1295, should propel the market to the 1350 mark.
Absentee of any news, the path of least resistance is to the upside.

S&P at year end.

The S&P is at the same level it started a year ago, despite huge volatile periods.
The Federal Reserve, the US Credit Downgrade by Standard and Poors, the deterioration situation in Europe, Congress Debt Ceiling debacle, Japan's Earthquake, all these events contributed to the huge market swings, but the market remained within a range and it's flat for the year.

Wisdom

Sometimes It Is Best Not to Trade What You Think
This statement does need some qualifiers, so here they are. First, if we think something seems logical, we need to wait for the market to prove us out before we go “all in on margin” because we are sure of what the market will do next. Second, simply because something makes sense doesn’t mean the market will respond in the way we think it will or at the time we think it will.

Range Trading Action

The S&P has been trading in a range for the last couple of months, and ended the 3rd quarter close to the bottom of that range. The first trading day of the 4th quarter has been positive 80% of the time, which suggests a green day for Monday. What we really have to look in our trading is to focus on a break of the range to either side. If we see the price breaking above 1230, the trend should be long and conversely if the price action breaks below 1100, the trend would be bearish for more selling ahead. On the other hand, the market can remain trading withing a range for longer periods of time, as we saw from February through July. Until the new trend is defined, quick profit taking is a must.

Wisdom

Trend trading is not a holy grail or a hyped-up secret black box, either. Beyond the mere rules, the human element is core to the strategy. It takes discipline and emotional control to stick with trend trading through the inevitable market ups and downs. Keep in mind, though, that trend followers expect ups and downs. They are planned for in advance.
According to an ancient proverb, "failure to plan is planning for failure." Trend followers succeed because they have implemented an investment approach that focuses on risk management and strict adherence to rules.

Death Cross

The death cross triggered this month will confirm if the market is unable to break resistance at the 50 EMA, in which case support at 1100 could be broken.

S&P Broke Support

Yesterday the S&P broke the head & shoulders support around 1260, indicating more selling ahead.
The next level of support is around 1175 and if that one doesn't hold we could go as low as 1060

Wisdom

"The ego is not your friend as a trader. The ego wants to be right, it wants to predict, and it wants to know secrets.
The ego makes it much more difficult to trade well by avoiding the cognitive biases that hinder profits." - Curtis Faith

Sell in May and go away.

Basically worked like a charm, as the market has been trading within a downtrend channel since the beginning of the month.
1335 - 1338 is the number to break the channel to the upside and go long, in the meantime the 100 Day Moving Average is offering resistance, so selling the rallies is still in play.

Trading

"There is no magic to trading. It is about
putting the odds on your side and not
trading unless they are. This sounds
simple, but it takes a few years to get
good at it."

S&P Selloff

The S&P 500 sold off since early on, losing 25 points, before the buyers stepped in at 1160 around the 20 day moving average.
1150-1160 is the threshold for the bulls and bears.

Wisdom

• The reason for using a trendline or moving average is to get an objective assessment of the price direction.

• Disciplined trading is most important because it clearly tells you when to get out of your trade and take your profit or loss.

• You can’t follow the trend and take profits at the same time. Profit-taking works with short-term trading, but profit-taking fights with the long term trend. You can’t hold onto a trend trade to get a big profit and at the same time take a small profit when things go your way for a few days. You’ll need the big profits to offset lots of small losses.

• In Trend analysis there’s no hocus pocus. Fundamentals, or value investing, may say that the company is in great shape while prices are falling. You’ll do much better trading technically.

Wisdom

Overtrading
There are stock traders who make 150 or more trades in a single day. I am not sure they make a lot of money. I firmly believe that you can make more money by making fewer trades because it will make you focus on only the best of opportunities, and play them with a larger amount of capital so the pay off is better. By being patient and disciplined with the really high probability trades, you can maximize profitability.

SPX Jobless report selloff

Today the market lost all of this week gains after a disappointing jobless report which came at 500,000, selling pressure brought the index below it's 20 and 50 day moving averages, but at least closed above the 1070 level.
The whole week the market has traded in a range between 1070 and 1100, so let's use those levels for initial support and resistance.

Wisdom

The market is an irrational creature. To rationalize the market can be fatal.

SPX analysis for August 13, 2010

On the weekly time frame we can clearly see that in July the market tested the 38.2% Fibonacci retracement of the May highs and now it looks like it is heading again that way, below the 38.2% retracement level, there is not much support and the index can easily go down and test the 950 mark at the 50% Fibonacci retracement level.
In order to avoid this scenario, the bulls will need to bring the index to 1090 above the daily 50 day moving average, close and remain above it.
Support remains at 1060 and resistance at 1090/1100 area.

Today the market broke down the upper trend line crashing down 30 points below the 1100 mark all the way to support at 1090 and resting at the 50 day moving average.
This action broke the uptrend that started the beginning of July and opened the doors for more selling ahead.
The next level of support is at 1060 and resistance is at 1100 first and then at 1120 at the 200 day moving average.

SPX analysis for 8/9/2010

Since the begining of July the market has been in a rising wedge, which can spell trouble for the bulls as it has been stalling around 1130 at the June highs.
Technically everything looks good as the index has been closing above both the 50 & 200 day moving averages.
Tomorrow's FOMC meeting results will definitely tell us which way the market should follow.
1150 is the next resistance level and on the way down support is at 1107 first, then around 1090

Wisdom

Taking small losses is part of the game. Taking large losses can take you out of the game.