This market has been tough to trade. With the government being shutdown several days now, and all of the noise surrounding the debt ceiling coming into play, the S&P 500 remains in a short-term downtrend. Let’s take a quick look at both the longer-term and shorter-term technical pictures of the market.
First, we’ll look at the this daily chart (below). With the rising 50-day and rising 200-day moving averages, it is still pretty evident that the longer-term trend remains intact. We certainly want to be more cautious now that the 50-day has been breached, but this is no reason to negate our bullish outlook for the remainder of the year. If we see continued weakness, and perhaps the trendlines begin to change their slope and point downward, then we’ll exercise more caution.
A quick glance at this weekly chart of the S&P 500 Index (below) also shows a key trendline that has come into play on several occasions. This trendline goes back to the lows that were made in November, 2012 at 1,343. From here on out, it has acted as strong support. We very well could see a bounce from the current levels on the S&P 500 Index. Of course, the alternative option is that we eventually breakthrough this trendline and make new lows for the month.
Finally, this last chart really illustrates why swing trading has been so difficult in the last few weeks. Ever since we made new highs of 1,730 on the S&P 500 (post FOMC announcement), the market has been in this “falling channel”. You can note this with the trendlines on this intraday, 30-minute chart of the S&P 500.
To be sure, the shorter-term trends remains bearish and we’re seeing volatility really pick up. It’s always a good thing to have a mix of long/short ideas when you’re swing trading so be sure to only go with your best setups. As far as the remainder of the year, we’ll see where things go.
Good luck out there.