The current scenario for equities seems that is at a time of uncertainty, where as soon we face a significant drop as before a bull rally, all the result of the prevailing volatility caused by economic uncertainty.
In these situations market signals and indicators contradict each other and cause analysis operator has a probability similar to throwing a coin appear correctly. SP500 analyzing the graph, we can draw two likely scenarios but opposite sign. Something to keep in mind when studying an operation is that who gives counterpart is taking the opposite position, also the result of analysis.
This view often overlooked is another factor to consider in our strategy because it can relieve us details that we have ignored resulting in a wrong approach.
To clarify ideas and see a practical example of the current situation of the SP500 analyzing two scenarios.
Bullish Scenario:
[SP500 daily chart 21/6/2010]
This graph shows a double bottom (indicated by 2 arrows), which relies on the important support of 1,040 points and upward rally that follows taking the index to 1,130 points above the MM200 (blue), lending credence the figure upward and encouraging its possible continuity to the area of 1,150 / 1,160 points. A possible correction to 1,100 points (clavicular line) remain bullish expectations intact.
Bearish Scenario:
[SP500 daily chart 21/6/2010]
This graph shows arguments possible peak upward and downward rally continuity, with average cross downwards; MM50 (red) and MM200 (blue), the correction of 50% of the fall (down 50% Fibonacci) to 1,130 acting and possible resistance turn downward.
Handle these situations in an appropriate manner it requires great skill of the operator in the correct perception of the dominant movement, doing not so important to hit the movement as manage the operation with a tactic that allows you in case of error, reposition quickly in the right direction and minimize the losses incurred.
Upon completion of this article , the SP500 has lost 1,100 points at the end and it seems that the bearish scenario is more likely.
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