Strong Support in the S&P – Be Patient

September 25, 2006 · Print This Article

Three out of the last five trading days, the S&P has held 1310. At this level, support looks “very strong”. Every time the bears try to test this level the market bounces sharply higher. This scenario was reflected in today’s trading as the market tested the 1310 area early this morning only to rally significantly higher.

Now the market is once again back near the May highs. This could pose a problem for the bulls over the short-term, however, given the recent action (strong bounces off 1310) the probablity of move to new highs looks much better. If the market can break above this area of resistance and hold over the next few days we could be in for a nice move over the intermediate-term. But, keep an eye on how the S&P reacts at its current level. There are still a few bearish indicators out there so be nimble.

During times like these I prefer to sit on the sidelines until the next significant move. As we move closer and closer to an overbought area, especially in QQQQ, a short trade looks more enticing. Although if we do move to new highs and into an overbought area I think waiting until QQQQ moves into a “very overbought” might be a more prudent choice for a trade set-up.

We could get a strong rally (breaking into new highs) and overbought rallies have a tendency to last a few days, taking out the shorts one by one. As always patience is key. It only takes a few decent trades to significantly beat the market so wait for those opportunities where the set-up looks great. Let Mr. Probability be your friend. I hate to keep harping on this, but we use this same disciplined approach in our ETF Extremes and the results have been outstanding so far this year. up 35.7% YTD with a 100% win ratio and best of all we have only traded in the strategy 8 times YTD. We offer this strategy and one other for auto-trade or if you just want to learn the strategy yourself or trade on your own you can follow our real-time alerts. Keep in mind that we offer a semi-monthly newsletter as well, with educational articles, seasonal and technical information, and strategy updates and much more. Check it out www.crowderinvestments.com.

RSI Wilder (5) for September 25, 2006