Tuesday, September 13, 2011

Adam Hewison: The Big Picture and the SP 500

Let’s take a look at the big picture and what it means today. There are a number times when the markets trade erratically. When this happens, you get out of the market with some quick move either up or down against you. Then, the market immediately goes your way the next day and afterwards you say to yourself, “I should’ve stayed in!”

That’s why it’s important to look at the big picture, and the big trends. What looked like a possible reversal yesterday, did not change the big trends in the markets. It just doesn’t happen in one day.

So let’s look at the big trends in the various markets we cover. Equity markets, the big trend is down. Metal markets, the big trend is up. Crude oil, the big trend is down. The dollar index, the big trend is up. And lastly, the CRB index, the big trend is down. Providing you are trading in the direction of the major trend, you have the odds in your favor. Always remember to keep your trading logs and game plan up to date. They will help you become a better trader.

Now let's look at where the SP 500 is headed.....

The two important lows that were established on August 26th and again on September 6th, around the 1140 area, are shaping up to be an important battleground for traders. The Bulls need to have this area remain intact in order for the market to go higher. The Bears must break through this area to continue the market’s downward trend. Long term traders should continue to be short or be out of the market completely, and in a cash position. Intermediate term traders should be on the sidelines waiting for either a buy or sell signal based on our Trade Triangle technology.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 75

The S&P 500 index closed higher due to short covering on Tuesday as it rebounds off August's uptrend line crossing near 1145.63. The high range close sets the stage for a steady to higher opening when Wednesday's night session begins trading. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term.

Closes below the aforementioned uptrend line would confirm an end to the corrective rally off August's low while opening the door for a possible test of August's low crossing at 1093.50 later this fall. Closes above last Thursday's high crossing at 1197.70 would temper the near term bearish outlook.

First resistance is last Thursday's high crossing at 1197.70. Second resistance is the late August high crossing at 1223.00. First support is the reaction low crossing at 1113.20. Second support is August's low crossing at 1093.50.

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