Understanding of the importance of the market and the economy will lead to profitable trades. Stay up to date with our news feeds direc cheap nfl jerseys tly TraderMongers.com! S & P 500Today we have a series of numbers and Ben Bernanke and the Beige Book. Ben Bernanke before the House Budget Committee stated that is housing and employment burden on our economy and the crisis in the euro zone, the current account deficit. The Beige Book noted that economic activity continued to improve.
German Chancellor Angela Merkel said the time has come to withdraw the stimulus and learn the lessons from the crisis. This sent the markets lower after being positive on the day. We expected the markets will be in a tight trading range between 1075 and 1100 however the lower the indices trend the trading range decreases has well. We now expect to be within a trading range between 1025 and 1075.
On Wednesday the S&P 500 reached a high just above 1075 before falling back and ending the day at 1056. Tomorrow weekly jobless claims are expected as well as the BOE and ECB announcements on interest rates. Expect the dollar to move accordingly after those numbers are released. Unless any major new announcements the markets should be within a trading range between 1050 and 1075 tomorrow.
Tuesday we had a retracement to the 1050 area which we reached in early February. This second attempt could break this area due to the low volume trading during the summer months as well as the issues facing Europe sovereign debt and the BP nfl jerseys oil crisis. We are trading below the 200 day moving average on the daily chart (1085) so expect any positive news to be a temporary rally as the volume dries up as me move along towards August – the slowest trading month.
The Chicago Board Options Exchange (CBOE) Market Volatility index (VIX) measures options activity within the market and is widely used tracking the S&P 500. A common trading strategy for traders and investors includes a VIX level of 30 or above means an immediate switch from equities to cash. Traders and investors are retreating from the markets and finding safety and protection within the Treasuries, gold, and the dollar.
As long as we stay above this level expect pessimism as we approach the slow summer months. Currently the VIX is above the 144 and 200 day moving averages on the daily chart. The volatility index is above 30.00 as of so traders and investors may maintain their short positions and retreat to safer assets.
However due to the low volume in the recent rally and liquidation of mutual fund investors due to frightening instances such as the ‘flash crash,' European debt crisis and BP Oil Spill expect volatility will return and traders will prey and make money on both ends. Traders will buy when investors are fearful and sell when they are euphoric and confident.
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