Friday, May 2, 2014

A look at S&P 500 after a lonf time

Welcome back!

(Or should I say welcome me back?)

Yes dear readers, after a long pause I am here once again with my analysis and let me start with five year chart of S&P 500:

I have drawn two trendlines, the lower one is a possible medium to long term support line while the upper one is actual trendline that has been in the act for current uptrend. Traders should keep an eye on this line for this uptrend but once (and if) it is breached the lower one is very likely to provide support.

The 50 and 200 day simple moving averages (red and green lines respectively) confirm the uptrend but my worry is the gap between the two. The annotations 1,2 and 3 show whenever 50 day moving average is far above the 200 day moving average index is very likes to show correction. So, annotation 4, which shows this gap once again, makes it a possibility that there may be a correction due in near future.

One important thing to note is that RSI does not show any overbought signs and one can be comfortable with uptrend.

Volume (not shown) is steady and does not give any clue so I have not included it.

Now let me present my views on short term chart:

This three month chart of S&P 500 looks very interesting to me. Bulls are trying to make an attempt to conquer the last high that it made. If they succeed then we may see a further higher marks on this chart but looking at RSI and those short candles it seems bulls are getting tired and may take a little rest. A good strategy would be to short it here and look for support at the trendline I have drawn. This line shows support near 1840. As the medium term uptrend is intact one should not be greedy and book profits if it happens as I guessed.

Happy Trading...

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