S&P 500 Technical Forecast From Jul 25, 2011 - Betting on Volatility
July 22, 2011 - S&P 500 closed today at 1,345.02 which is about 29 points up compared to last week close of 1316.14 on July 15, 2011.
Last Week Analysis
Let's look the S&P technical levels in the following chart. S&P 500 is currently above 21 days, 50 days and 200 days EMA. As technicals are still indicating the bull signal, It may try go higher but eventually it will have to come back to 200 days EMA of 1262.33. Market was mixed and S&P 500 closed up last week erasing the previous week loss.
Last Week Low: 1295.92 (About 20 points down from 50 days EMA)
Last Week High: 1347.00 (About 20 points up from 10 days EMA)
If you are a long term conservative investors, then you have to switch your investment strategy and move on the Fixed Income Securities - Govt. Bonds, US Long dated Treasuries (TLT), US Dollar (UUP), etc.
If you are a long term risky player in the market, then you can initiate short position and accumulate short position gradually in the coming weeks. You can not expect return in the short term.
For Speculators and Intraday Players
The debt talks, earning season and on going crisis from Euro Zone will increase the volatility. Buying VIX call options might be good idea but both the risk and reward are very high. Better not to play VIX if you are conservative.
Only if you are day trader, you have to follow swing strategies. It is ok to bet on the volatility by betting either side (long and short) on the market. The reason for bull signal is based on technicals only. The technical indicators are correctly following the patters which means 10 days EMA is more than 21 days EMA, 21 days is more than 50 days EMA and 50 days EMA is more than 200 days EMA. This is a very clear indication for bull signal.
But fundamentally the US market is very week due to unemployment and slumping house prices along with US debt fears and possible downgrade. Always fundamental wins in the long run.
Based on technicals you can take long position on US stock market, but to protect the sudden collapse due to fundamentals, you must hedge your positions by buying put options.
10 Days EMA 1327.80
21 Days EMA 1320.33
50 Days EMA 1315.38
200 Days EMA 1262.33
Next Resistance Levels:
strong resistance level at: 1386.95 set on Mar 16, 2007
strong resistance level at: 1433.06 set on Aug 03, 2007
strong resistance level at: 1440.70 set on Nov 23, 2007
strong resistance level at: 1453.55 set on Sep 07, 2007
strong resistance level at: 1,530.23 set on May 30, 2007 (first closing high after dot com bubble)
strong resistance level at: 1,552.87 set on Mar 24, 2000 (all time high during dot com bubble)
strong resistance level at: 1,565.15 set on Oct 09, 2007 (all time high during housing buble before sub prime crisis)
Next Support Levels:
minor support level at 1315.38 - 50 Days EMA
strong support level at 1262.33 - 200 days EMA
strong support level at 1189.40 set on Nov 26, 2010
minor support level at 1064.59 set on Aug 27, 2010
strong support level at 1022.58 set on Jul 02, 2010
strong support level at 1036.18 set on Oct 30, 2009
strong support level at 946.21 set on Jun 12, 2009
strong support level at 827.37 set on Sep 27, 2002
strong support level at 683.38 set on Mar 06, 2009
strong support level at 638.73 set on Jul 19, 1996 - Might see this number again when completing double dip bottom
Posted on July 23, 2011