The S&P 500 looks to be forming a new trading range between the 920 and 950 levels. As shown below, the index has now traded down to the low 920s twice in the last several trading days before rebounding. This level was also the peak of the prior rally in the month of May. Coincidentally, 920 is around the current level of the 200-day moving average, so we would expect this level to act as support going forward. While 920 is acting as support, 950 is currently the main level of resistance. Over the last several days, rallies have run out of gas as the S&P 500 approached this level. Even today's late day surge looks to have hit a wall when the S&P 500 hit an intraday high of 946.
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Marc Faber commented tonight that stocks are risky here and that a top might be in the cards,
"This is a high risk entry point for equities." Marc Faber
Full interview here: http://marcfaberblog.blogspot.com/
Keep up the good work.
Posted by: Henrique Simoes | June 09, 2009 at 07:04 AM
Thanks for delimiting the current trading range. This is a useful insight. I've had some success lately by buying "iron butterfly" option spreads on the S&P500, then profiting from the time-decay. I'm betting that summer trading will be range-bound due to stagnation in the stock market, so selling delta-neutral option premium makes sense. I appreciate seeing your ideas on the likely range of prices.
Posted by: Paul Teetor | June 09, 2009 at 10:06 AM
Recent look-alike: March 2002: trading range above 200 day ma.
Posted by: mt | June 09, 2009 at 05:11 PM