The Rogue Investor » rally

50MA proving to be major source of resistance

Alex — Thu, 15 Jul 2010 23:45:46 +0000

Often the 50 and 200 day moving averages serve as support and resistance depending on if prices are above or below, respectively. Now, we are seeing the S&P 500 stalling at the 50MA for the third time begging the question: will we bounce off it again?

I've circled the three times the S&P has bounced off the 50MA.

We are now up to three sessions closing right on the 50MA. While volume is still below average, we have seen an increase as of late.

To answer the question posed above, I don’t think we will see any further rally above the 50MA for the mean time. My reasoning is the decrease in volume as stocks moved higher shows a lack of buying to propel things any further and a relative increase as stocks reached the moving averages, usually signaling a reversal.

Earning season is upon us though, so some unexpected positive data could be the catalyst to bump the market higher and on top of resistance.

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Long opportunity as stocks finish strongly

Alex — Wed, 09 Jun 2010 06:43:43 +0000

Today the major indexes closed near the top of the range after being down pretty significantly and almost reaching new lows. The bulls showed up as the possibility of going long is now on the table.

The smart play here is to wait and see where things shake out tomorrow. Don’t rush in at the open and enter a position without knowledge of where the professionals are pushing the market.

Here’s a chart of the S&P 500:

The S&P 500 is reaching a tipping point as the resistance and support collide.

There are two points for a bullish rally and one against.

First, the S&P 500 had two days where it fell below the support line rather severely (the two green lines extending below the pink “Support” line). Instead of rolling over, we saw the index push back on increased volume to finish near highs above the line of support. Secondly, we’ve already seen a v-bottom occur at this level back in February.

Conversely, the resistance line is growing closer and closer to the support line. This would suggest that we might see a downside breakout as stocks are pushed lower by the short-term down trend.

As I said earlier, best bet is to keep an eye on things and see how the market reacts to these forces. Once we get a clue as to the trend of the market, invest in that direction.

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Support found, oversold markets rebound

Alex — Sat, 22 May 2010 03:37:04 +0000

In the last month, the S&P 500 fell 10.65% (including today’s rally). We revisited the support levels established by the flash drop and rebounded in a major way today.

This support line would provide evidence for a bottom here.

Was today really a bottom? Monday will tell us. I think we will see a follow-through day that will confirm that the rally is back on for now. Until it is confirmed, stay in cash with a buy list ready.

Here are some stocks to keep an eye on if the market keeps moving higher:

CRM - Salesforce.com

NDSN - Nordson Corporation

HIBB - Hibbett's Sports, Inc.

These stocks should only be bought if they break into new highs and the market is in a confirmed up-trend.

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A bullish Wednesday keeps rally hopes alive

Alex — Wed, 28 Apr 2010 21:40:32 +0000

The S&P 500 and Dow were bullish today, rallying back from lows on increased volume to close near the middle of yesterday’s drop.

Energy and Basic Materials were the best performing sectors and the Dow moved above the 11,000 mark again. In economic news, the FED announced that rates would stay low which was expected.

Here’s a chart of the S&P with some analysis:

S&P 500 - Price and Volume Analysis

We’re seeing a pickup in volume lately and prices have been stalling. I’m not claiming a top, but this could be a resting point due to profit taking. Watch for rising prices the rest of the week to confirm today’s revival of the rally.

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Major strength after selling pressure

Alex — Mon, 26 Apr 2010 03:40:43 +0000

I’m holding onto my longs but waiting to buy anything new.

This week’s trading left smiles on bull’s faces as prices rebounded and closed near or on highs every day. The rally is still on and earnings are producing all time highs. A main hesitation keeping me cautious is that the S&P is trading at resistance levels.

Here are some charts:

The S&P 500 - Price Analysis

Above, 1 shows the major drop on Friday (-1.6%) and 2 points out this last week of trading (+2.1%). Here you can see how each day this week closed on/near the highs after being down pretty significantly at some point. This, along with the above average volume each day is a very bullish characteristic.

S&P 500 - Resistance Line

This chart illustrates how prices have reached resistance levels. There are a couple of possibilities as far a future price movements.

First, we could see a pullback that many investors have been anticipating for a while now. The markets have gone almost 3 months and over 14% of gains since the last pullback. Second, the S&P could keep on rocking along the line.

If I’ve learned anything this year, it’s that the rally will outlast anyone’s projections and the only way to play this is to ride the wave.