Resistance Levels For The SPX, Current Long Positions

The stock market had another pause day on Friday after Thursday’s 9 point surge. The SPX finished slightly higher on much lighter volume and the 1345 pivot high has been reliable as a resistance level. So far, the market has traded almost exactly the opposite to what most had expected to happen in the post QE environment. This makes sense given that the market sold sharply off into the end of QE and encountered major support at 1260. The end of QE was priced in to the market and despite this, many still believed that more downside was immediately ahead which is why I was looking for a rally beginning with the 4th of July weekend. I do believe that the market is headed lower over time, but there is still upside left, which is why I am positioned long.

1345 has held up as resistance so far as the market rested after a solid move up off of the 20 and 50 MA’s last week. I see two scenarios for next week, the market either pulls back off of 1345 for a brief consolidation before a move up to 1360, or the market opens higher and runs into 1360 before coming back in for a pullback. Either way, I am still seeing some continued upside in the short term. It is also possible that the SPX makes it back to the 1370 double top, but I doubt that it will not happen until it can at least consolidate above 1345 and 1360.

I am long TNA for this swing higher and I am currently about 4% in the money on the trade. The IWM is the best proxy to use for TNA since IWM is not leveraged and because of that, the levels on the chart are more reliable. The IWM confirmed above $83.25 with Friday’s close and is now headed for $84.61. Confirmation above $84.61 should indicate a move to $85.62 which would translate to the 1360 pivot on the SPX.

Another long I have is Sky-Mobi (MOBI) which is a volatile Chinese tech play. Chinese stocks like MOBI have been decimated after a massive run reminiscent of the move in silver a few months back. MOBI had a nice surge behind good volume 2 weeks back and has since consolidated above the 50 and 20 MA’s. As long as it stays above $8.15 on a closing basis, it can be a long play for a move back to just under $12. Entry for this stock is currently open, so any price above $8.15 on a closing basis is okay to use, so long as it doesn’t gap a dollar or two higher tomorrow, but I don’t think that will happen. Just remember that these Chinese stocks are volatile and carry added risk, but in this case, the chart pattern is very favorable.

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About Aaron Basile
Market Technician, Equity/Commodity Trader, Austrian Economist, Contrarian Investor

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