SPX Chart and Trading Recap

Still Congested. Swings are tough and scalps aren’t much easier.

Today was another tough day for traders eager to find direction in an overall messy market. The SPX hasn’t experienced 3 or more consecutive up days since early April and is still trading under its SMA50. More importantly, it hasn’t convincingly moved through SMA200. Since the close above SMA200 last Tuesday, we have basically moved sideways. In fact, today the SPX finished below last Tuesday’s close. We’re treading on thin ice.

On the positive side, today’s significant move off the morning gap up was not accompanied by heavy sell volume. Second positive observation – SPX closed above SMA200 and is forming somewhat of a bull flag. But, overall, the charts still look neutral to slightly top heavy. Cash is still sitting comfortably on the sidelines while we wait for the next catalyst.

Until we get that next big market mover(financial regulation, European bank stability, July earnings, etc), I’m continuing to tread lightly and keep swing positions to a minimum. Day trading is still the best game in town right now… but even that isn’t a walk in the park.

Speaking of day trading based off the SPX – check out the chart below. I took out some of my indicators to simplify the idea and give you something to start with if you don’t already have an intraday trading system. Watching the overall market is a good starting point.

In this example (5 minute SPX intraday), notice the obvious descending channel. If you picked up on this pattern early in the day, you could have traded something like TZA by adding to position when market reversed at the top of the channel and sold TZA at the bottom of the channel on SPX move back up.

Also, notice the large selloff after the price dropped out of the channel AND fell below the open. The combination of these two often leads to a strong intraday selloff and a good time to short the market.

Today, I played the downside market fade by getting in and out of TZA for an overall up day in my portfolio – not much, but anything is good right now. My only hold into the close was a last minute S (sprint) buy off the SMA50 bounce. I have a stop pretty tight under SMA50.