Spread betting stocks and stock indexes update following Friday’s close ahead of the long holiday weekend in the US for Independence Day.

We wrote on Thursday that the next couple of days were of potentially major significance for the stock markets and in particular the S&P 500, which earlier this week finally broke through long term support.

As we have written before, when we have a major trend change or breach of long term support or resistance we like to see the market close beyond the prior support/resistance level at least once and preferably twice to give confirmation. Ideally, we also like to see confirmation from Friday’s close in addition. Friday’s close is the most important close of the week as it represents the level at which traders are willing to hold their positions over the weekend.

On the September S&P 500 contract we saw a new low intra day of 1006.5, slightly lower than Friday’s close at 1014.3. It looks likely that we will get a test of support at 1000 next week, which is a major psychological round number and there is the possibility of a bounce higher from that level although both the long and short term trends are now down. If 1000 fails to hold the market then we look to the next support area around 980.

We have also written previously about the large head and shoulders pattern, which has been forming of late and the break below support this week gives a break of the neckline and points to a large continuation lower. Taking the distance from the top of the head to the neckline indicates a downside target in the 860 region, which is roughly the area of the July 2009 lows. Should the market fall to that level, which seems quite a long way off from here, then the next target would be the March 2009 lows around 650.

This potentially gives a major trade to the downside and would be an extremely profitable trade for those people that are spread betting stock indexes and are willing to go short as well as long. Users of financial spread betting should be equally comfortable spread betting from the short side as well as the long side if they want to increase their spread betting opportunities and profits. If anything, markets fall quicker than they rise, so trading profits can be clocked up quickly.

Good trading.

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our trend following methods for spread betting stocks please click here.

Following on from yesterday’s post on spread betting stocks, we have an update on the stock markets. In yesterday’s post we wrote that yesterday would be a very important day for the stock markets and it was, but today and tomorrow are now possibly even more important.

As we had written previously, there was major support on the S&P 500 at 1034.8 and this was broken briefly to the downside on Tuesday with new lows at 1030.5 on the September contract. At that point the market had not closed below support but closed just above long term support at 1035.8. Yesterday however, the S&P 500 broke lower again, reaching new lows at 1023.20 and closing at 1026.6 for a new low close this year.

We have written previously that at key points when we get a potential long term trend change that we like to see 2 closes below the prior support and we got the first of these yesterday. If we get another close below support today then that may really open things up for a downside break much lower and this would perhaps be confirmed by the most important close of the week, which is Friday’s close. This Friday’s close carries extra significance as it is ahead of the long holiday weekend in the US for Independence Day.

It is possible that if the market rallies today a bit and closes above yesterday’s highs around 1045 that we may get a crack and snap formation and the market may rally from there for a couple of weeks before we get a major break to the downside towards the end of July.

For now, the Dow 30 and Nasdaq 100 have both held above key long term support (around 9670 on the Dow September contract and around 1728 from the February lows on the Nasdaq) and so that adds to the possible bounce scenario. We will have to wait and see what happens during the rest of today and tomorrow. As ever, we will wait for the market to tell us where it wants to go and then jump on board in the direction of the trend and ride that trend.

Good trading and good luck with spread betting stocks

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our proprietary trading methods for spread betting stocks please click here.

Over the past couple of weeks or so we have been writing about some key levels in the stock markets and some key things to be looking at when spread betting stocks, in particular the S&P 500. We have been writing about the importance of key long term support at 1034.8 on the S&P 500 September contract and how we expected that that level would be tested if support at 1070 failed.

We had written previously that the failure to push up above the resistance area around 1120 did not bode well for the short term since and the doji patterns that had formed at those levels confirmed upside resistance, indicated that the market was tired and changed the short term trend from up to neutral. It did not take much more from there to send the market lower towards short term support at 1070.

Yesterday the 1070 support level failed and this triggered a big down day for stocks and the S&P 500 fell all the way to the long term support level, briefly piercing support with a new contract low of 1030.5 before a slightly higher close at 1035.3, just above major support. This represented a decline of 3.32% for the day. This was also followed by major moves in the other stock indexes, which included failure for the Dow 30 at 10000 and the FTSE falling through 5000 and means that today is very likely an important day for the stock markets.

At the time of writing this, which is fairly early on Wednesday morning, the stock index futures are pushing marginally higher and it would not be too unusual to see a bounce higher in early trading after the size of the move yesterday. What happens during the rest of the day remains to be seen but the key thing to look for today for those of you who are spread betting stocks is a move back below support at 1030.5 and in particular a close below this level.

There will always be those traders who try to pick bottoms in markets and buy at support levels and we may see some of that today but although the market is pretty much dead on the major support level now there are currently no reversal signals, so trying to buy the bottom is a dangerous play. At LS Trader our approach is trend following, so we wait for support to fail and then use a momentum play to trade in the direction of the trend, which in this case will be down if support fails.

Should we get a move today back down below 1030.5 then the S&P 500 will likely be heading for the psychological round number of 1000 and below that down towards support around 965-970 and possibly further out towards 860, which would complete the previously mentioned head and shoulders top.

Let’s just recap the importance of the 1034.8 level that we have been writing about previously:

• A break of this support level would give new contract lows as well as being the lowest level seen on the S&P since November last year
• Our proprietary indicators at LS Trader would indicate that the long term trend has shifted to down should the market take out support here
• The previous sell off on 5^th February found support at this level
• This is also the level of the lows of the “Flash crash” day on the 6^th May
• Support from the lows of the hammer formed on the 5^th February is also at this level and a close below this pattern negates the support from the hammer.
• This level also represents the neckline of a head and shoulders pattern that would give us a target of 860 to the downside.
• Our longer term view on the stock markets is bearish overall and we expect significantly lower prices in the stock markets later this year or at the very least at some point during the next 12 months.
• We are also on a seasonal basis moving in to the weakest time of the year, with September being the weakest month on average

Until next time, good trading and good luck with spread betting stocks

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our proprietary trading methods for spread betting stocks please click here.

Continuing our recent series of posts on stocks and spread betting stocks, in particular the S&P 500, we eventually got the breakout that we had been looking for. As we had indicated may be the case yesterday, due to both the long term trend and the steady progression higher over the past few sessions from support, the S&P 500 broke out of the range to the upside, with the S&P 500 clearing resistance at 1101.5 and closing at 1109.2 on the September contract.

This recent sideways action went on for 18 sessions before the breakout occurred and the close above the intervening high between to the 2 lows of that range means that the double bottom is confirmed. In addition, the close is also above the high of the shooting star pattern from previous day’s session. The shooting star is a reversal pattern and a close above it means that it is no longer valid. Therefore, things in the short term are looking better than they have been of late and we may get a continuation higher from here.

The question now is how far can this move continue? As we wrote yesterday, one way of getting an idea of the potential move is to take the height of the immediately preceding lateral trading range and add it to the breakout level. Doing this can give us an indication as to how far the breakout may go and where the market may end up. In this instance the range is around 65 points, so we can look for a continuation higher possibly to around 1165. There is some resistance at around 1142 that may come in to play prior to that target. There is also resistance from a falling window around the 1142 to 1151 area.

It remains to be seen as to whether we get sufficient strength in this market for it to generate a buy signal and we will look to the action over the next few sessions and in particular the weekly closing prices before initiating any position. The LS Trader financial spread betting system has specific rules that dictate when and where we enter any position and it takes more than just patterns to enter a trade.

Good trading

Phil Seaton

PS. You can find out more about the LS Trader financial spread betting system and how we combine financial spread betting with our trend following system by clicking here. The system comes with a 30 day no questions asked money back guarantee

Continuing on from our post last week on spread betting stocks where we talked about the current lateral trading ranges that the stock markets are in and in particular the S&P 500 (the real stock market), today we look at what has been happening in the S&P 500 and what may happen next. There are a number of technical factors in play in this market which may have a considerable bearing on where the markets go next and this information should assist you in making your decisions as to how you are going to be spread betting stocks and in particular the S&P 500 over the coming days.

In the S&P 500 (September contract), the trading range is still between 1034.80 and 1100. This range has now held good for the last 17 sessions and has not been outside of it since the 19^th May on the basis of closing prices.

Over the past few sessions we have seen a rise from support up towards the top of the range at 1100 (the intra day high yesterday was 1101.5 but the market failed to close above that level). From the highs of the day yesterday, which were right on the resistance that we have been talking about in recent posts, sellers returned and we got a shooting star pattern confirming resistance. For those not familiar with shooting stars they are a bearish candlestick pattern and more relevant when they confirm a recent resistance level as they have in this case. This shooting star will be valid until the market closes above the high of the shooting star at 1101.5.

As we have said before there have been a few attempted rallies which have taken the market up towards the top of the range, only for the market to reverse and go back to the bottom of the range where buyers have each time come in. This has lead to the sideways action. The longer that this sideways action continues the larger the eventual breakout is likely to be.

Just to clarify, as some commentators are erroneously stating that we have a double bottom on the S&P 500 that that is not the case. For a double bottom to be confirmed the high between the 2 lows has to be taken out and as yet this has not happened. If the market closes above the high between the 2 lows then this will also be bullish.

Therefore, the levels to watch are still 1034.8 to the downside and 1101.5 to the upside. When we have a lateral range like this we can use the height of the range and add it to the breakout level to give us an indication of how far the initial breakout is likely to go. In this instance the range is around 65 points, so we can set upside targets to around 1165 and downside targets to around the 970 area, although there are other support and resistance levels that may come in to play prior to those targets should we eventually get a breakout. It’s wise to wait for a breakout confirmation before making any spread betting decisions.

As we wrote in our last post on spread betting the S&P 500 of the 2 breakout levels the more  critical level is the bottom of the range at 1034.80. A break here would change the long term trend to down, aligning the short and long term trends and likely giving rise to more selling. To add to the significance of this level the lows here are at the same level of the lows of the previous sell off on February 5^th, where we had a hammer pattern from which the rally began. A hammer pattern is a bullish reversal pattern and is the opposite of the shooting star, which is the bearish reversal pattern formed yesterday.

Therefore, a close below the February 5^th lows will negate the hammer pattern and also give a long term trend change to down whereas a breakout above 1101.5 will negate the shooting star and give a bullish breakout. Since the market is closer to the top of the range and the long term trend is still up for US stock indexes, the odds slightly favour an upside breakout but we’ll have to wait and see what happens.

The LS Trader financial spread betting system does not initiate trades on reversals as it is a trend following system, but instead goes for momentum plays on breakouts in the direction of the trend and sits on the sidelines through lateral trading ranges.

Good trading

Phil Seaton

PS. You can find out more about the LS Trader financial spread betting system and how we combine financial spread betting with our trend following system to beat the markets, including the stock indexes such as the S&P 500 by clicking here. The system comes with a 30 day no questions asked money back guarantee

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 5^th, where we had a hammer pattern from which the rally began.

Therefore, a close below the February 5^th 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.

Good trading

Phil Seaton

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