Sunday, May 29, 2011

The week ahead

The bulls made a comeback in the latter half of the week, but the future don't appear too bright for the bulls here. Following is the daily S&P chart. Here are a few points to consider before you overcommit yourself to the long side:

1. The market seems to be channel bound since last April and got rejected right on top of the channel last Friday.

2. The volume has progressively decreased during the last three up days.

3. Resistance looming right ahead in the form of MA(20).

4. 1338-1340 have act as tough resistance levels in the past and the same can be expected this time too.

5. Most of the sector charts got rejected at major moving averages on Friday. The move up has been on relatively lower volume. Here are a few of these sector charts.

All the above doesn't mean that I will not be playing the market to the long side in the coming week. Just that I will be making sure not to overcommit myself to the long side. For that, I would wait for a break of 1345, for that would imply higher highs being finally formed on the S&P.

Take care and good luck!

P.S.: Did you know this blog is being written from India since last August?


Chris said...

good analysis... #1 on my list is to see if the channel is still the trade. I'm big on volume indicating quality of price action but discount this concern slightly due to low volume entering holiday weekend (plus advent of summer).

positiontrader said...

Thanks Chris! I don't give as much importance to volume for overall indices as I give to overall stocks. A large portion of the rally in the last couple of years has been on relatively low volume. So, it is just one of the factors, rather than being THE factor. But still important nonetheless.