Today we closed below the yearly open of 1113.75 on the SP. This is important to note because it could provide a sense of direction going into the end of the month and into the end of the quarter. We closed at 1110 today (5/19/10) and this will be a number that we focus on heading into this Friday which is option expiration. The 1110 will serve as our pivot, in conjunction with the yearly open of 1113.75, and should help lead us in a direction for the next 48 hours. If we are trading above this number after Friday, we could see acceleration higher; if trading below, could see a reversal and head lower. Based on historical price action, this should stand for the next 30-40 days.
The current environment suggests further weakness to the downside as the sovereign risks in the EuroZone continue to play out which has contributed to a 4-year low in the Eurocurrency. There is fear that this is just the beginning of a major economic crisis that could accelerate quickly through the rest of Europe and finally into the U.S. The “flash crash” that exposed electronic trading vulnerabilities have also appeared to spook some investors.
To learn more, please visit: www.dtitrader.com or call 800.745.7444.
http://www.dtitrader.com/media/tom_riskmanagement_5-10-10.wmv
