Brett's Stock Market Pulse Sunday, May 22, 2011 (Possible Market Scenarios)
Seeking Alpha Analyst Since 2011
Elaborating on our update from Friday we see a few possible scenarios for the stock markets next move. The S&P 500 and Nasdaq Composite last week found resistance near their 21-day moving averages and support at their 50-day moving averages. Based on this we would use a move over the 21-day moving averages on a closing basis as an indication the market wants to keep moving higher. In contrast, we would use a close below the 50-day moving average as a sign the market wants to move lower. For the S&P 500 (SPY) a close over 1,345 would be bullish and a close under 1,325 bearish. For the Nasdaq Composite (QQQQ) a close above 2,835 and close under 2,779 would be bullish and bearish, respectively. As long as the indexes are between these levels we remain in a range bound market that will probably make it difficult for both bulls and bears to make money. The risk/reward ratio doesn't seem to favor either side right so the best game might to see if what described above plays out before going either long or short stocks.
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