Stocks & Commodities V. 23:9 (98): At The Close by Jayanthi Gopalakrishnan

Stocks & Commodities V. 23:9 (98): At The Close by Jayanthi Gopalakrishnan

The S&P 500 has done a good job staying above its 50- day moving average since May 18, 2005 (Figure 1). There was only one day (7/07/05) when it hit a point below the MA, but that drop proved insignificant at the end of the day—the closing value was once again well above the MA. For the moment, things are looking good for S&P traders. In light of this scenario, I applied the tighter, 40-day moving average on the daily chart. As you can see in Figure 2, I found it to act as a more accurate support level from 6/24/05 to 7/8/05. With that in mind, the chart shows the S&P 500 as healthy, with possibilities of holding onto positions for a little longer than one day.

Take July 8, 2005 for example. On the 5-minute chart of the S&P 500 e-mini contract in Figure 3, you can see there was a surge in volume at 12:25pm. If you had opened a position at say, 1215.50, when a new high for the day was made, and if you had held that position until the next trading day, you would have gained a hefty return. Of course, this is easy to say in hindsight. If you are accustomed to exiting your positions before the close, it’s very difficult to hold onto a position overnight, or in this case, through the weekend.