Consolidation Day – Bad news and market holds
Consolidation Day, the markets are littered with bad news, but price holds in this supported range.
After this past week’s abysmal news on the economy(unemployment numbers), corporate greed(Libor is fixed), and the monopoly game in Europe(Merkel has staying power), the S&P500 is stalling into the new week with a consolidation day. Consolidation is when the market is waiting for a leader to set direction or news to create direction. First, let’s consider where the market has traveled.
Day traders moved this market from 1300 to a high of 1375 the last week of June and high side consolidation through the Fourth of July week. Which as mentioned in previous post is a good time for a rally. A retracement of close to 40 points is normal. 1342 to 1349 has been an area of support and price has consolidated at these levels for the past three sessions. 1348.25 is the Point of control in this market and if Sellers can keep the close below this level we might see a test down to 1333 before the move up.
Again, the S&P500 could be unhooking from the Euro. Normally there is a positive correlation with the moves of the Euro to the US Dollar and the S&P500. Or another way to look at it is as the Dollar index gains strength, the US indexes will go down. An inverse relationship. Earnings could set this divergence off, and as Earnings come in we could see the correlation drop between Euro and the S&P if Strong US companies with earnings generated in mostly US sales. We shall see.
The closing will show a reversal on today’s price action with a negative reaction priced in.
More than likely, we will see a reaction to earnings that earnings are not that bad and investors will come back into the market. If so, we could see a move to 1400 and above. We could see this also effect Gold prices.
The dollar index is sitting at a high side consolidated range. Watching for a move to 82.97 with some support. If it breaks through here, watch for a move to test the lows at 82.45.
Seems really unlikely as the Euro is high risk.
Gold could see a move up to the resistant trend line at 1614.50 and some consolidation at these high prices. The Gold traders have kept this in a very tight range with a 100 point range from 1530 to 1644. 1600 seems to have some psychological significance as price has slowed at this level on both the move up and down. Watch for volatility as investors see it as a risk off trade and the institutions see it as a risk on trade when any big news comes out. Remember volatility and corrections on the news is what kicks most traders in the commodities markets. Best to take profit and be very nimble.
Trade what you see and never listen to the so called experts. If you can’t see the direction of the market and don’t understand how to use a stop, then don’t trade. Never take stock tips, and if it is on the TV as a hot pick, it is too late.
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Disclaimer: day trading is high risk, do your own work : The efficacy of both technical analysis and fundamental analysis is disputed by efficient market hypothesis which states that stock market prices are essentially unpredictable. Be responsible for your trades, do your own work and never rely on others. When searching for a Day trading course, be sure you understand the risks involved in day trading consolidation.