Chicagostock Trading

Chicagostock Trading

SP500 Market Update - Video

 

 

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Technical Analysis Right Before Your Eyes

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SP500 Will History Repeat Itself?

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(click chart to enlarge)

The SP500 has come a long way.  Starting the year at 1838 to put in lows of 1732 and make highs of 2079 as of recent.  The 2nd half of the year has seen volatility expand.  July began just as January did, a very tight trading range followed by a small pullback before rallying into new highs. Difference in the 2nd half was the new highs was rejected in September, with the market falling apart in October to take out the August low and fall into 1813, testing major support based off the April lows.  The break of the multi year bullish channel, was followed by one of the most massive and violent short squeezes ever.  Just as early October the market put up a strong fight with violent short squeezes before finally letting go down to 1813, the move back to 1970 was just as violent.  The reversal from 1970 to 1813 and back to 1970, was a major short squeeze and V shaped bottom.  After this short squeeze, it was time for the market to take a breather, consolidate, attempt to build a base and support for new longs to join for a new leg up.  What happened was a different story.  Rather then allowing buyers this opportunity… Halloween 2014, just as the SP was pressing against major resistance against the September highs, BOJ came out with an expansion to their QE program, lifting the lid above the September highs and seeing the SP trade through 2k for the first time ever.  Rather then allowing the cool off period at 1970, the BOJ squeeze forced buyers to chase the market above 2000.  November made early lows at 1995, before grinding up to into highs of 2072 going into the Thanksgiving holiday. During this period, the cash market worked very hard to open and settle the market at its prior close, walking a very tight line.  Following the holiday, the market saw a gap open lower down to 2048, only to becoome a bear trap as the following day the market squeezed back above 2060 to save cash buyers and grind out new highs.  Draghi came out on the 4th of December, touting a ECB QE program in January which led the market to scetch out another new high at 207725.  All of these highs were made by a few points and saw profit taking into them. The following day was NFP and the SP managed once again to squeeze 2077, print highs of 2079, and fail to hold above. This led into a break out failure, seeing the market fall back to retest the December 1st low of 2048. 

 

 

The SP’s move below the Dec 1st low of 2048, has confirmed a short term failed breakout above 2077 and a double top.  The move now is testing major support down to 2015 based off the November low of 1995 that led to the chase higher.  The current break has caught longs off guard and sellers are looking for blood to press the market lower.  Failure to hold the November low of 1995, confirms a failed breakout above 2000 as the market retraces back below the BOJ QE breakout and leaves buyers who chased above holding the bag.  First major downside support is seen down to 1977 to retest the breakout point from October’s V bottom 1970-1813-1970.  The question that will arise and will be seen is will there be buyers left to buy the market at this level, after the BOJ forced them to chase above 2000?  This will leave for a thinner bid on the downside and more longs who are caught giving way for volatility to expand.  A failure to hold 1970 gives room down to retest the 1813 low with major support down to 1840.  The objective for the sell side is to take out these lows and test the 2014 low of 1732 with support coming in at 1750.  To reverse current momentum, buyers need to recover above 2050 to retest resistance at 2068 based off the highs of 2079.  The objective for the sell side is to settle the market below the December 1st lows to establish a weekly sell signal and bearish engulfment.  

 

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How Does the Ali Baba Top Differ from 2011's Bin Laden Top?

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The recent reversal in the SP500 has reminded us of a similar time the charts and reversal felt and looked the same.  The above chart is from 2011.  As seen the market made an early high of 1335 in February, correcting down to 1241 before rallying back to new highs.  New highs were made on what was called the "Bin Laden" high. On the news of his capture, the SP printed the highs for the year at 1373.50 and turned lower to retest the previous 1335 lows made in February.  This retest was followed by a "U" shaped reversal that recovered back to where the market failed at 1348 on the 1st of June.  This reversal failed to stabilize and push through the highs, leading into what developed the right shoulder for the 2011 head/shoulder top and crash down to 1080 that was fueled by the debt downgrade.  QE 2 ended in July 2011, just as QE 3 is expected to end 10/29/14. 

 

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The Crawl Back to 1915

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After attempting to hold last Tuesday, the market rallied to 189275, only to meet major resistance against the broken August lows of 1890. This led to a narrow range last Tuesday, barely holding Monday's 186375 low.  Globex saw the market break this triple bottom against 186375, giving way for the 189275-186375 range to be expanded down to 183475 (189275-186375=29, 186375-29=183475). The market fell on Wednesday to complete this target, however continued another 20 handles lower into 1813 to test major support from the April lows, before seeing a squeeze back to the 1863 level.  The following day saw a retest of the lows which held, creating another range, 1863-1813. The range gave room for the market to expand up to 1913 (1863-1813=50, 1863+50=1913), or down to 1763, depending if the ES was able to breach the top range at 1863, or bottom range at 1813.

 

 

On Friday the SP500 recovered above 1863 and attempted to target Tuesday's 189275 highs, running into 189175.  The break above 1863, gave the market room to expand up to 1913.

 

On Monday the SP took out last Tuesday's 189275 high and found support down to 1870 before rallying into close at 1900.  Today, 1 week after the failed 189275 high made last Tuesday which was followed down to 181300, we have recovered back above those 189275 highs and completed the short term range expansion target of 1913.  The move now retests major resistance based on the double top made at 1930, along with revisiting the scene of the crime, being the 1920 major support level that was tested early October before finally giving out and falling 100+ handles.  Old support becomes new resistance.  A move through 1980 is needed to reverse momentum and create a V bottom on daily charts as rallies into 1920-1958 offer sellers an area to defend.  

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