After months of plodding ahead, making an average gain of just 2.5 points per day, the market topped on each of the major indices in late April, traded briefly in small reversal formation, and on May 4, broke lower. But the break generally held on each index’s 50-day moving average (m.a.).
Then, on Thursday, May 6, all three major indices sliced through the 50-day m.a. like a knife through butter. The attack lower didn’t stop until it had slightly overshot the 200-day moving averages on each index. It was the biggest one-day loss in history, with the Dow falling 779 points from intraday high to low. But by late afternoon, much of the loss had been regained and the integrity of the 200-day moving averages was preserved.
Then Monday opened with its strongest gain of the year and a triple-digit gain for the Dow.
New OptionsZone.com Coming Soon!
With volatility now higher than at any time since April 2009, traders have an opportunity to cash in on some very wide swings that are yet to come.
The next major support is at the February low of around Dow 10,250 and S&P 1,085, which also matches the November/December multiple lows at the same number. The Nasdaq’s next major support is at 2,210 and then 2,110.
If Dow 10,250 and S&P 1,085 are penetrated, look to the February closing low of Dow 9,908 and S&P 1,063. Beyond that there are many more levels of support established during the past year.
As for resistance, look to Dow 10,875, S&P 1,170 and Nasdaq 2,421.
In summary, the immediate trading zones are Dow 10,730 to 10,875 and S&P 500 1,153 to 1,170. The Nasdaq’s immediate zone is 2,320 to 2,421.
Within those zones are the significant resistance lines of the 50-day moving averages, which is 10,846 for the Dow, 1,172 for the S&P 500, and 2,412 for the Nasdaq.
Related Articles:
- How to Stay One Step Ahead of a Major Reversal
- Top 6 Stocks for May
- 10 Tips to Getting Started With Technical Analysis
The Options Trader’s Guide to Technical Analysis
In his latest report, learn how John Lansing leverages the power of technical analysis to identify the short window when a trade is set to go straight up or down. Get your FREE copy here!
