Draw an trendline on the S&P 500 chart from the November 2012 low and it happens to currently coincide with the big round-number 1800 level. With no other support levels nearby, 1800 will be an important psychological level for the S&P. Unless a new wave of optimism blows in, the magic 1800 level will attract sellers until the index nears it. If and when the index hits 1800, a poker game better than any you've seen on TV will develop. Every player will be asking him or herself “do I raise or do I fold?”
The problem with the S&P 500, and many major stocks, is that the Stochastics indicators on the weekly charts still hover at high levels, suggesting that if a bear market mentality takes hold the recent weakness could have a ways to go,
Earnings season is just starting, which adds another layer of uncertainty.
Seasonally, the S&P 500 has a track record of a slight average gain over the next few months, with only a slightly better than 50% ‘win rate' (the number of year with gains versus losses).
The best bet right now? Let stop-losses and trailing-stops protect existing positions. Wait for the S&P 500 to show if it is going to test 1800. And wait until we get through a good part of the earnings announcements.
The good news is that when the market is in a longer-term bull mode, the S&P 500's pullbacks tend to be quite short.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, please click on the following link: www.markettamer.com/seasonal
Copyright (C) 2014 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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