S & P 500 in Current Scenario 28.12.2012

Above chart is a daily chart for S & P 500. On price action we have bollinger bands with 200 ema as the central band with two standard deviations above and below it. The 200 ema is at 1385 and upper band at 1478 and lower band at 1293. The current price action is between the range of 1385 to 1445 as the upper band and lower bands. So till the prices are above the level of 1385 we have chances of recovery on the index. The pivot of the band of 60 points is at 1415. The short term trend is down as the price is below this pivot of 1415 with potential to hit 1385. Three sets of indicator is used to supplement the study of price action with standard parameters. The 14 day RSI is below the level of 55 which is negative for the trend. If we observe the past action there was consolidation between the band of 55 to 68 on RSI. The top came around the level of 68 on RSI. For any new high the level of 68 on RSI is to be crossed. The trend to gather strength the RSI should again oscillate between 55 to 68 level. Next is MACD which is very dynamic as it has no boundaries for oscillation and depicts the true picture. For signals we can use the histogram and signal crossovers as shown by arrows. The signal is above the zero level and the histogram is near the zero level. It has given a negative crossover so the trend is down. Last is MFI(Money Flow Index) 14 days which gives early signal and divergences. Currently we see the divergence working marked by the red arrows. MFI is near its support zone breach of it will accelerate the down trend. To sum it up the breakout on the positive side can happen only above 1445. Breakout on the downside can happen below the level of 1385. In between this range we can play the channel for bread and butter trades.

Happy Trading !!!