The Average Investor's Blog

A software developer view on the markets

Important Developments

Posted by The Average Investor on Aug 25, 2011

A really important week for the markets ending with a statement from the Fed on Friday, which may spur some buy signals based on my interpretation of various indicators. This is no advice to purchase any shares of course, but let’s take a look at the crystal ball of actions. As always, the action alternatives are clear, the results are a mistery. 🙂

With respect to the 20-Week EMA, unless the markets explode, there will be no developments. Here is the data:

Index Price Cross Wednesday Close Percentage (Cross/Close)
S&P 500 $1,271.87 $1,177.60 8.00%
Nasdaq 100 $2,274.56 $2,145.04 6.00%
US REIT $58.40 $55.30 5.60%
Emerging Markets $45.64 $40.63 12.30%

The table tells us for instance, that the S&P 500 needs to close about 8% higher on Friday than the close on Wednesday in order for the close to be above its 20-week EMA.

There is every chance that we may get a buy signal with respect to the Dow Theory, as always, my guide is the Jack Schannep’s book in the link section. My interpretation is that currently the important levels are:

Index Recent Highes Wednesday Close Percentage (Highes/Close)
S&P 500 $1,204.49 $1,177.60 2.28%
DJ Industrials $11,482.90 $11,320.71 1.43%
DJ Transports $4,684.44 $4,428.43 5.78%

Quite close in fact, just keep in mind that two of the three indexes have to penetrate their recent highes.

Next, the 200-Daily EMA for the S&P 500 stands $1,260.44. Quite unlikely to be penetrated tomorrow, but certainly doable in a two/three day rally.

Finally, next Wednesday is the end of the month, thus, the re-calculation of the 10-month EMA. At the end of last month, the S&P 500 closed above this average. In order to close above it again, thus avoiding a sell signal, the S&P 500 needs to close next Wednesday above $1,278.64. Pretty ambitious in general, but quite possible in the current environment.

Happy trading!

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One Response to “Important Developments”

  1. […] to my interpretation of Schannep’s Dow Theory of the 21st century. As I mentioned in an earlier post both the S&P 500 and the Dow Jones Industrial were getting closer to the important levels. The […]

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