Monday, August 6, 2012

S&P 500 Looking "Toppy"

Today - the S&P 500 closed at 1394, just 6 points below the key phsychological level of 1400. Looking at the chart provided, this is a key resistance level to maintain the downtrend from the highs set in the spring of this year. If you are a bull, then selling at these levels may be a wise decision for the short-term. The next entry-point to go long would be at the 50-day moving average. If you are a bear, this creates an excellent point to go short and ride down to the 50 day moving average with the expectation that the S&P 500 will break these levels. There hasn't been any news out lately to justify a break above 1400-1408, but that could always change if a EU Finance Minister comes out and says "we are going to plan to make a plan" - unless the market wakes up and calls their bluff. Therefore, as a risk managment strategy - a trader should play the range of the 50 day moving average as possible support and the 1400 level as resistance. This may seem elementary, but the high-frequency trading machines have these levels as their trigger points either up or down.

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