Sunday, May 17, 2009

The Weekly Trade 5/18

Last week the SPX ended the week at 882 and it was the first negative week in awhile. It came down to rest right at the 20 day ema and below here we have the 50 day ema at 854. I think this week should be a "line in the sand" type of week. By this I mean that the 875 level will dictate where we trade to next. It has significant support so I would not be surprised to see buyers emerge here but until we are back above 900 I will not be convinced that a pullback has concluded. Something tells me the market wants to come back to 850 or so to test that 50 day and scare out some longs before stabilizing.

Tuesday- Building Permits, Housing Starts

Wednesday- FOMC Minutes

Thursday- Jobless Claims, Leading Indicators, Philly Fed

The housing data early this week along with earnings out of HD and LOW should get the juices flowing on the housing bottom argument. Also, remember the following weekend is a long weekend so the volume towards the end of week should get a bit thin overall as some head out for vacation.

For Monday I want to start neutral and let the market establish a trend to guide my trading. I would be expecting a continued pullback. The daily pivot on the ES futures is 885. Any bounce into this area should see sellers step in to make a stand. If we are unable to trade above that 885 mark on the ES then I would think 875 is a sure bet and perhaps a grind back to 850 this week. Like I said earlier I would not be getting too bullish unless the market had a nice move back to 900. Be rigid in your disciplines but flexible in your expectations.

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