OptionsHouse

Options Trading News

December 8, 2011  Thu 12:11 PM CT

SPX: SEE CHART GET CHAIN FIND STRATEGIES
With the pending results of the European Union summit tomorrow, there are two technical features on the chart of the S&P 500 that we should follow.

The daily chart below shows the 200-day moving average in red and an overbought/oversold indicator below the price graph in orange. We can clearly see that the index ran into resistance at the 200-day moving average in recent days. At the same time, we can see that the overbought/oversold indicator reached close to overbought but then rolled over.

This overall picture reflects a failure to break above resistance levels and a loss of price momentum. The net effect is that we may be caught in another down leg now that could take the S&P 500 to oversold conditions near the 1160 low of its range.

That is what the technicals are suggesting could happen. But ahead of the European Union summit, we need to be aware that if something unexpected develops, whether positive or negative, the technical trend won't help much.

For example, the S&P 500 was on its way to decent gains this morning, but comments from European Central Bank President Mario Draghi torpedoed the rally on both sides of the Atlantic. The core concern was an explicit denial that the ECB was prepared to extend bond purchases.

However, if markets see enough promise in the outcome of tomorrow's meeting, there will be in all probability a major rally in stocks. Equally, a failure could have a similar longer-term effect.

Why? We could see our Federal Reserve move to a quantitative-easing stance if the Europeans fail to resolve the debt crisis quickly. Were that to happen, U.S. stocks would be more likely to rally.

SPX

(Chart data provided by Thomson Reuters)
Share this article with your friends


Related Stories

SPX

Cautious puts in Procter & Gamble

April 27, 2015

The consumer health-care products giant fell sharply after reporting earnings last week, and traders are positioning for more potential losses.

SPX

Futures gain before Apple's report

April 27, 2015

S&P 500 futures are up 0.2 percent before Apple issues results this afternoon, while Europe is higher by up to 1 percent. Shanghai surged 3 percent and Hong Kong gained more than 1 percent.

SPX

Stocks up on earnings, Greek hopes

April 24, 2015

S&P 500 futures are higher by 0.1 percent, while the Nasdaq is up 0.6 percent. German equities climbed 0.6 percent after its Ifo business-confidence index beat expectations.

SPX

Greece, durable goods top agenda

April 24, 2015

Greek officials meet with Eurozone creditors, and Germany's Ifo business-climate index is also due early in the morning. U.S. durable-goods orders are due at 8:30 a.m. ET.

SPX

Global data weighs on U.S. futures

April 23, 2015

S&P 500 futures fell 0.3 percent. Frankfurt is down 1.3 percent, while Paris slid 1 percent and Milan is down 0.9 percent. Most Asia markets eked out small gains overnight.

Invest Like a Monster - San Diego: June 26-27

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Education & Strategy

Vega

There is another Greek which measures the effects on an option's price buy changing the amount of extrinsic value in the option, and that Greek is Vega...

View more education articles »