Spread betting stocks and stock indexes.The stock markets continue to trade within the current lateral trading range. On the S&P 500 (September contract), which is the main stock index, the range is between 1034.80 and 1100. This range has held good for the last 14 sessions.
During this period there have been a few attempted rallies, but each rally has been met with selling, which has pushed the market back towards the lows of the range. Likewise, there have been a couple of attempts to break support at the lows and these have been met with buying. During sideways action like this it is best to wait for the breakout and then follow the market in the direction of the breakout.
In the short term there is a bias to the downside but the long term trend remains up, and the divergence between the two trend periods is keeping the markets in a sideways range. If 1100 can be cleared to the upside we may get a continuation higher to around 1140 before the next level of resistance comes in to play.
The more critical level though is the bottom of the range at 1034.80 as a break here would change the long term trend to down, aligning the short and long term trends and likely give rise to more selling. This level is even more significant as the lows here are at the same level of the lows of the previous sell off on February 5th, where we had a hammer pattern from which the rally began.
Therefore, a close below the February 5th lows will negate the hammer pattern (which is a reversal signal and still holding good until the market closes below the pattern) and also give a long term trend change to down. A break here could lead to selling down towards the 960 level and could provide some good spread betting opportunities to the downside.
At LS Trader, since we are trend followers, we don’t initiate trades on reversal patterns to go counter trend, but instead watch them as a momentum play if the market closes beyond them, thereby canceling the reversal signal and giving a momentum signal in the direction of the trend instead.
You can find out more about the LS Trader financial spread betting system and how we use financial spread betting with our trend following system to beat the markets, including the stock indexes such as the S&P 500 by visiting the LS Trader website.
PS. To find out more about financial spread betting and how we spread bet the markets for profit, please visit the LS Trader website by clicking here. The system comes with a 30 day no questions asked money back guarantee