TradeStalker's
Support and Resistance Update
12 / 19 / 2010
(Published Since 1996)
...............................................
Dateline: 5:36 pm eastern time, 12/19/2010
We had a volatile week while in a pretty small range. The ES
double topped at the 1242.00 level on Monday and Tuesday,
but the moves didn't stick on either day. On Thursday
morning the ES dropped to the 1227.50 key support area and
turned back up, and the rally back took the market averages
back to key areas by Friday afternoon. The 1241.00 level on
the ES turned into a lid overhead, and once the ES broke
1239.75 the symmetry broke and the market pulled back into
the close.
My sentiment gauges are at extremes not often seen. The Vix
closed at 16.11 on Friday. This could be partially due to
expectations of a quiet holiday week ahead. It's not the raw
number that's meaningful, but pretty good when used right.
The SP500/Vix ratio reached 77.21, and is more than 15%
above its 25 day average. That is stretched, and should soon
revert to the mean. Also, the last time that ratio was above
77 was April 14th, 2010 and after a few days of pullback,
the market rallied to a slightly higher high and then fell
more than 200 points on the SP500 to the July low. In
addition to that, the 10 day put/call ratio is at its lowest
level since the April top. Along with the overly bullish
crowd, the small ranges are getting old. Small range days
tend to occur near tops, and bottoms occur when volatility
is high.
The market reached a short term oversold condition on
Wednesday and now most gauges are neutral. The market is
range bound currently, and the 1227.50 low on the ES made
last week is a major area to hold. The top of the ranges,
and the 11500 level on the Dow cash were rejected on Friday.
This is a short holiday week, but unless those zones are
cleared soon, the market is vulnerable. However, even if
they are cleared and the move goes another 10 points or so
higher on the SP500, the way things are looking, it won't be
too long before a good sized correction sets in.
On Friday the 1235 support was broken by half of a point and
the market rallied back. The day didn't end well though, and
the Nasdaq futures led the way lower, making a new low for
the day in the final few minutes. So, look for shorting
opportunities if there is a bounce to test the initial
resistance and the move stalls or reverses. Only a move over
those zones that holds gets the market into a last gasp
rally mode. Otherwise, the market is still vulnerable and
that 1227.50 area is a major support that must be reversed
again to avoid a bigger correction.
March 2011 SP futures resistance
symbols: emini = esh1 / big contract =sph1
1240.25-1241.00 *11500 Dow CASH*
1143.00-1243.50
1247.00-1247.50
March 2011 SP futures support
symbols: emini = esh1 / big contract =sph1
1238.00-1237.50
1235.00-1234.50
1232.00-1231.50
1227.50-1226.50
March 2011 Nasdaq futures resistance
symbols: emini = nqh1 / big contract = ndh1
2220.00-2220.50
2226.25-2227.25
2238.25-2239.25
March 2011 Nasdaq futures support
symbols: emini = nqh1 / big contract = ndh1
2212.50-2211.50
2208.50-2207.00
2199.50-2198.50
2192.75-2192.00
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---------------------------
Good Trading,
Mike Reed
Copyright (c) 2010 by TradeStalker.com, Ft Wayne, IN.
TradeStalker Updates may not be redistributed without
permission.
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Disclaimer
The financial markets are risky. Investing is risky.
Past performance does not guarantee future performance.
The foregoing has been prepared solely for informational
purposes and is not a solicitation, or an offer to buy
or sell any security. Opinions are based on historical
research and data believed reliable, but there is no
guarantee that future results will be profitable.
We are not advocating trading futures. The prices and
contracts in the TradeStalker Updates specify a manner
in which you could trade. We occasionally mention the
SP500 and Nasdaq futures markets because it is
extremely liquid and tends to lead the other markets.
This is not an endorsement or recommendation of the SP500
and Nasdaq futures markets. The risk of loss in futures
is substantial. You can lose more than your original
investment. We are not Registered Investment Advisors or
Commodity Trading Advisors.
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