SnP 500

SnP 500

As said in the last post about SnP a break of 1040 lead it to the lows of 1010 and then the index bounced off the support area.

Now let’s take a look as the factors which can affect the behavior of the index in the coming days.

Monday being a holiday the US market will remain closed and hence the low volumes on Friday, consequently we need to think whether to give much importance to the bounce from the mild support areas of 1010. The volume on the day SnP fell below 1040 was very high and hence we need to take 1040 as a strong resistance, also it was a strong support quite a few times before. The bull will surely try to nudge past 1040 once again however they will need large volume for it to be a convincing rise. On the other hand once 1010 is broken 990 can act as a support on the downside.

A cautionary note to the bears amongst us, a positive divergence seems to be developing in the last few days on the SnP 500 which cold lead to a sideways movement if not an outright rise.tis +ve divergence will act as a momentum booster only if the index manages to close above 1040-45 with good volumes.

Economic news we must consider.

US jobs data.

Private employers added jobs for the fifth consecutive month, however the pace of job addition decelerated and the work hours fell from 34.4 hrs per week to 34.1 hrs. The momentum in the housing market has started to taper off recently thus dampening the mood on the Wall Street.

Thus the levels we the traders need to watch are.

1>     990 on the down side below which the fall will gain more momentum and this scenario looks more likely as of now.

2>     1045 on the upper side, a close above this level will provide much needed respite to the bulls and then they will try to target 1075 levels.

3>     The short term traders amongst us who have short positions need to watch out for the positive divergence which can lead to sideways movement as well as flash of rise in the markets.

4>     Traders who are seeking to enter the markets on long side better do so only on a bounce above 1045 which is accompanied by good volumes.

5>     For those amongst us who are seeking value in the market, the correction till now has been of more than 15% and at 990 it will be more than 18% correction from the tops, so one can try and pick stocks which have out performed the index till now and put a miniscule amount of money in them.