Trading Plan for May 20, 2013
Weekly Outlook - S&P500 Cash Index (SPX)
The S&P 500 cash index ($SPX) closed at 1667.47 on Friday, up 33.77 points for a 2% net weekly gain.
It was the third week that S&P500 moved into previously uncharted territory. It made a new high around 1667.47 and extended its weekly winning streak to four.
This week is a pre-holiday week. S&P500 is more than 1000 points above its low in 2009 and we should be concerned about the market's extreme optimism. Profit-taking will be seen at some point.
SPX Weekly Chart
In the short-term, SPX has now made a 100% extension from its 2011 yearly range. The SPX has also had 1000 points gain from the 2009 low, which an important psychological milestone. Both could lead some buyers to lock in their profit in the coming days.
The short-term indicators are extremely overbought; in addition there is a small negative divergence between the price and the MACD indicator. That indicates a small pullback could happen soon. If SPX fails to break through 1685 level this week , a pullback into the 9ema line (weekly) 1600-1605 zone should be expected.
The long term uptrend remains bullish. Any pullback towards the intermediate-term support lines will be countered by the buyers. 1600-1590 is first major support level. As long as this support stands firm we will continue to see the rally march toward its final destination around the 1734 level.
Monthly resistance 1700 and support 1575; Weekly resistance 1685 and support 1630.00
Daily Outlook S&P500 e-mini futures (ES)
ES had option expiration on Friday. The option squeeze pain pushed the price up to new high territory. Based on Friday’s closing, we may see a continuation high move today. But for this to occur the price needs to go down first and hold above first hour low and then reverse up to breakout first hour high.
Market sentiment is strong, it could remain strong until people realize the risk. So far we didn't see any awakening. Everyone could be steady running into a trap set by the big firms
Date Added: 2013-05-18 22:27:16