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Deron Wagner is the founder and portfolio manager of Morpheus Trading Group. His daily focus is managing and trading the Morpheus Capital Hedge Fund, which he founded in April of 2004. He also teaches his swing trading strategy with The Wagner Daily newsletter, which provides exact entry, exit,... More
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  • Nasdaq And S&P 500 Indices Bouncing, But Major Overhead Resistance Remains ($SPY, $QQQ, $DIA, $SPX, $COMPQ, $DJIA) 0 comments
    May 30, 2012 4:19 AM | about stocks: SPY, QQQ, DIA

    Over the past five sessions, the stock market has begun showing signs of a potential bullish reversal. However, there is still a lot of overhead supply stocks must overcome, so we are cautious about changing our bearish sentiment of the market. A quick technical review of the daily charts of the Nasdaq and S&P 500 should help clarify why we are not overly anxious to revert back to the long the market without further confirmation. Let's start with a snapshot of the Nasdaq Composite:

    (click to enlarge)$COMPQ

    On the chart above, notice the Nasdaq is approaching near-term resistance of its 20-day moving average at the 2,900 area. If it is able to reclaim this key mark (former support that has now become resistance), there is still an ample supply of sellers at the 2,960, 3,000 and 3,040 levels. Further, it is unusual for an index to lose support of its 20-day and 50-day moving averages and fall to within striking distance of its 200-day moving average without at least testing or "undercutting" its 200-day moving average.

    The benchmark S&P 500 Index also faces formidable resistance. The S&P is now within six points of its 20-day EMA (1,340 area). If it can reclaim support of its 20-day EMA, the S&P still must work its way through key overhead resistance near 1,360 and 1,375. As with the Nasdaq, the S&P 500 has major support at its 200-day. Again, it is unusual for an index to come within striking distance of the 200-day MA without testing it first.

    (click to enlarge)$SPX

    Yesterday's stock market performance was impressive, as it resulted in an "accumulation day" for both the NYSE and Nasdaq. However, price action was a bit weaker than we like to see in order to declare a "buy" signal for the broad market. Despite yesterday's bullish price action, there simply isn't enough evidence to support going long right now, especially with the major averages below the 50-day MA. Nevertheless, yesterday's "accumulation day" comes on the heels of last Wednesday's bullish reversal day. Although our market timing model remains on a "sell" signal, we have to be respectful that the market could put in a buy signal quickly. Right now, astute traders must be patient and wait for low risk short setups to develop by the end of the week OR the less likely scenario of a new buy signal to trigger.


    The commentary above is an excerpt from The Wagner Daily stock newsletter. Subscribers to the full version also receive our exact entry and exit prices for swing trade setups of the best stocks and ETFs, access to our market timing model, and more. You may test drive our stock report with the top stock picks and ETFs risk-free for 30 days. To learn more about our proven trading strategy, please visit and bookmark our trading blog.

    DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter "The Newsletter"). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.

    © 2002-2012 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.

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