Wednesday, July 28, 2010

Still bullish and where the support lies

Another bullish day in the markets today, in fact, if anything, even more bullish than yesterday. Why, you might ask, after all, the market was down more today compared to yesterday? Well, in my opinion, the market had plenty of reasons ranging from bad durable goods orders number to the Fed announcement to fall hard from its overbought state, but didn't. It still hung in there and finished respectably. That is bullish.

But let's see the levels from which we can expect support. Below is the S&P 30 minute chart in which I have marked the resistance and the next two support levels. 

Similarly, here is the Nasdaq hourly chart with the support and resistance levels marked. It is sitting on an area of support right now and further support should be around 2240 level. 

So, that's where we stand right now. I am not going to turn bearish until these levels are broken. The pullback is the last two days has been moderate and orderly, just what the doctored ordered for the bulls. We are still in a consolidation stage but I think the direction of the markets shall become clear before the end of the week. Until then, its better to trade small and focus on managing your risk.

I will be back with some more posts later in the evening. Take care and good luck!


bill said...


I will tell you exactly what the markets will react to tomorrow. If jobless numbers are good, market goes back up and resumes climb. If jobless numbers are bad, markets go bearish resume 3rd day of selling and nasdaq smashes through 2240. As i commented before, i think the market is reacting more to macro news than earnings and that doesn't play nice with short term technical data either, i see a broader 2-3 year technical chart needed to see longer trends.

Also have you noticed the last few days the Dow and the Nasdaq trading vastly far apart % wise? I take that as a bearish sign.

Are sitting on cash for now or do you have some trades up your sleeve?

positiontrader said...

Hi Bill,

Firstly, sorry I forgot to reply to your comment yesterday. Seeing your comment right now reminded me about it.

Yes, the reaction to the job numbers will be very interesting, specially if the numbers are very different from what's expected (in either direction).

If Nasdaq breaks the 2240 level that I have plotted and that you also mention, I will change my stance.

As for the macro level, I did share my views with your previously that I believe things are worse than they appear and I don't believe the market reflects that at the moment. But my plays are too short term and stops too near for me to be really affected by it on a daily basis.

My biggest position right now is cash. I did buy some DOLE today as I point out in the other post. I am keeping my positions small and stops close till the market resolves itself. BTW, check that post out as I think there are some interesting setups out there.

Yeah, I did notice that late in the trading day today and I thought it was weird that DOW was not more down.