S&P Charts Face Critical Buy/Sell Pivots Ahead of FOMC Meeting

The markets were having a hard time identifying an early direction and now the move looks more entrenched on gains.  Traders and investors need to be watching the technical pivots against yesterday’s trading levels in order to not get burned.  We are tracking the daily buy/sell pivot points on the SPDR S&P 500 (AMEX: SPY) as the most liquid equity ETF that there is.  The aim is to help any trader avoid buying at the wrong time or shorting just before a intraday rally as the Spyders closed above the 50-day moving average yesterday of $134.93.

Erlanger Value Lines are designed to identify key levels for the intraday trader or for anyone trying to establish a new position during trading hours. The Value Lines fall into three categories: Support and Resistance, Extreme values and Range values. From a practical point of view, the Value Lines can act as targets and triggers for short-term trades.

Some think it is uncanny how these levels stop or turn back short-term price swings. We do not. Why? Because both high frequency traders and program trades have built these levels into their models which cause them to gravitate to resistance, pivot or support along with range values like the 5 and 60 minute ranges. We have compiled here the daily chart, the daily analysis for traders to use, and then we have followed it with a general guideline after the daily commentary along with a sample chart.

For today’s S&P 500 SPDR chart analysis, Phil Erlanger said,  “Monday saw the SPY close between resistance and pivot. Today we are trading above resistance on SPY. Watch to see if resistance holds at $134.99. The 5 minute high will also be key to hold today and that level is $135.24. Do not attempt to short unless we break below resistance. So much for a quiet day as the FOMC begins a two day meeting.”

The Erlanger Value Lines can be accessed via Erlanger Chart Room. Given that we are using real time data, Erlanger Chart Room will require a subscription to eSignal Q Charts or access via Bloomberg’s data api. For more information we direct you to sign up here.

General Notes:

  • If price moves above the red Resistance value line, then the intraday bias turns positive:
  • A positive bias reflects times when only long trades are considered.
  • If price moves below the green Support value line, then the intraday bias turns negative:
  • A negative bias reflects times when only short trades are considered.

Additional general notes for how to use these charts:

  • If price remains within the green Support and red Resistance value lines, then the bias is neutral. The pivot line can be used to establish an intra Value Lines bias. Pivot to Support is negative and Pivot to Resistance is positive.
  • If price remains within the first hour high and low value lines, then the bias can also be viewed as neutral. This is especially true if the first hour range is inside the range set by the support and resistance value lines:
  • A neutral bias reflects times when both long and short trades may be considered or (depending on the traders style) a time for no trading. All Erlanger Value Lines can be used as short term target levels. This is especially true if a few are clustered together.

June 18, 2012

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