The Rogue Investor » resistance

Markets retreat to averages; Inverse head and shoulders possible

Alex — Fri, 30 Jul 2010 07:17:16 +0000

The S&P 500 is testing trend line support as it pulls back to the 50 and 200 day moving averages. Today, volume popped and prices closed just below the middle of the range.

Overall, things are looking bearish after we failed to move above a previous level of resistance as seen in the following chart:

The resistance and support are converging, creating a turning point.

Despite the slight jump in volume today, we have seen the market drift with only one day of above average volume in the month of July. Another interesting point is that this is the first time since April that the S&P has spent more than a couple days above the 50 MA.

It’s worth noting that we could possibly be seeing an inverse head and shoulders pattern:

A possible pattern forming is the inverse head and shoulders.

If we get a boost higher off the moving averages, this could be a legit pattern and we could see the head serve as a bottom. Check back for more.

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Market pops, volume doesn’t

Alex — Fri, 23 Jul 2010 01:37:55 +0000

The Dow jumped up a strong 2% today on slightly higher volume. Even then, a late session pullback leaves the market under resistance and based on the action, I expect it to bounce lower.

Here’s a chart:

Here is the current trading channel the Dow is moving within.

Regardless of where I think it will go, the market can still move above resistance. If this happens, watch for a a follow through day and for the market to continue higher.

I’ll do a weekly wrap-up tomorrow. Have a great Friday!

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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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Resistance likely to cause decline in markets soon

Alex — Tue, 13 Jul 2010 05:36:34 +0000

After almost a 5.5% bounce higher (that I called), I expect the market to find resistance and begin resume its decline to the 9600 level.

We have seen the volume drastically decline as the market moves higher indicating a lack of buying as prices rise. Also, the major exchanges are coming up on both the 50 and 200 moving averages (which are converging bearishly).

Here’s a chart:

The overall trend is down and signs are pointing to more decline.

When shorting, it is best to wait for a sign of weakness (i.e. when the market moves higher but gives up the gains and closes on/near the lows of the day).

I expect to see an tipping point within the next day or two. The volume will most likely be above average and the day will close largely off the highs. Check out either Facebook or Twitter for an update.

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Volume floods markets, Monday’s session very important

Alex — Mon, 28 Jun 2010 06:41:49 +0000

Friday’s session has set up Monday as a pivot point for the future of the market’s direction. The S&P 500 is near the support line at 1070 and there is narrowing room for advancement before resistance is met.

Above average volume shows an increase in professional trading.

The Dow, NASDAQ, and S&P 500 were all basically flat on above average volume on Friday. Each index finished in the middle of the range which is a bullish sign as they each are near support.

Monday will give us a better idea of where the market is heading. My best guess is that we will get a bounce higher and continue in that direction until we run into resistance around 1080, 1085.