Monday, September 6, 2010

Chart of the Week: The Monthly SPX

Most of my trades have a tendency to last from a couple of days to a couple of weeks, so as a result I tend to spend almost all of my time looking at charts with daily bars or intraday bars. As a consequence, I find that I run the risk of not focusing on long-term trends.

One of the ways I try to overcome trading with short-term blinders on is to force myself to study some weekly and monthly charts. I find that particularly when markets seem to be at potential inflection points it pays to take out that wide-angle lens and step back for some additional perspective.

This week’s chart of the week is an attempt to do just that with the SPX, using monthly bars going back to 1998 to put the last few months into historical context. What I see is a classic bullish bounce off of a cycle low that has now advanced just shy of the 50% retracement level. Stocks have been consolidating for the past 4-12 months, depending upon one’s perspective, and are likely going to soon be choosing whether to continue upward above the 1220 level and establish some new bullish momentum or fall back below 1010 and make a run in the direction of 666.

The longer time horizon does not necessarily make it any easier to discern the direction of the next big move, but it does a better job of laying out the battlefield and where both bulls and bears should be able to declare victory.

Keep in mind, of course, that it is the victors who get to write history…

Related posts:


[source: StockCharts.com]

Disclosure(s): none

blog comments powered by Disqus
DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2013 Bill Luby. All rights reserved.
 
Web Analytics