Market commentary for 05/24/2010
Friday started with a continuation gap down from Thursday. On daily charts we can see the DIA and SPY opened at the previous low that is a strong support area. This support triggered a bounce and filled the gap. The QQQQ was the strongest and on the bounce reached Thursday's high and daily 200sma resistance area. The DIA was the weakest and we can see that on the 60 min charts. For the DIA the 60 min 10sma is still too strong of resistance.
The SPY was in the middle and went nearly to Thursday's high. For those who didn’t take a long right after the open they missed their best opportunity, high risk as it was. With option expirations our activity was very light. I have said several times that risk is paramount with me and if I don't find a good risk trading plan I won't take the trade. After the open run the indices fell in a tight range without much opportunity for a good risk/reward trade. Market support is very strong and the charts suggest that will hold for now. The last 15 min the indices bounced and they closed at the highs that suggest Monday strength at the open.
Since world markets are very nervous it is still high risk to be in overnight trades. As I mentioned several times; cash is position too, and right now it is best time to use it. On the charts we can see that 20sma 60 min and 200sma daily are first resistances for DIA and SPY, and it is Friday high and 60 min 20sma for QQQQ. The main question is: did we see the bottom or not? It is impossible to be 100% sure but the weekly volume and support area says; yes for now. As I said above it is impossible to be sure but from my experience as TA reader on the weekly charts I will expect to see a right shoulder formation that will be a weekly bear flag or weekly bounce to lower high. Let’s imagine that indices will bounce into resistance area. In that case the odds for right shoulder will be open. This is looking in the future, but without strong news it is very possible from TA side. For now we must see the daily action and double bottom action. Risk for overnight trades will remain high lowest risk will be with intraday setups.
Wish you all good trading!!!