Spread trading stocks and commodities

Recently we have been discussing various spread trading strategies for stocks and commodities and the 2 markets that we have been focusing on are gold and the S&P 500. Let’s begin today with gold. In our last post on gold we wrote that we were looking for a move back up above short term resistance at $1215. We had written that there had been a bull harami pattern on the weekly charts and that this pointed to higher prices in the short term and a test of $1215 resistance early in the week. We got that test yesterday and the market moved up to $1218.8 (August contract) at one stage in the day but was unable to close above $1215. We may have another go at this level soon and the long term trend is up. In the short term we have support at $1185 and also around $1200, where gold pushed higher from yesterday having been as low as $1196. We don’t currently have a buy signal out in this market but spread trading strategies at present here should be considered only from the long side, in the direction of the long term trend until or unless we get sufficient weakness for a change of long term trend. Our other market of focus is the S&P 500 (September contract), which has continued to impress from recent lows at 1003.1. Yesterday saw another big move higher and the market now looks set to test what many people consider an important level, which is the 200 day moving average (I’m not a huge fan of moving averages myself). The 200 day moving average current stands at just over 1100, which once again is a round number and a resistance area. If 1100 can be cleared then a continuation higher to the highs seen on June 21st around 1130 may follow, where we expect major resistance may be found. As yet there are no reversal patterns showing in this market (or any of the stock indexes that we trade at LS Trader) so short term strength may continue. The long term trend remains down but I will not be selling at present due to recent short term strength even though I expect that to falter in the not too distant future. It’s always best to wait for confirmation from price action before initiating any positions. Because there is divergence at present between the long and short term trends our preferred spread trading strategy for the S&P 500 is to stay on the sidelines and wait to see what develops. We still view this as a counter trend rally and therefore won’t be buying it as it is against the long term trend. Good trading Phil Seaton PS. To find out more about the LS Trader financial spread betting system and our proprietary trading strategies for spread trading stocks and commodities.

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  1. July 15, 2010 at 8:35 am #

    Great information! I’ve been looking for something like this for a while now. Thanks!

    Posted by cna training

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