$SPX for the week 13 Mar 2017
A small negative week for the S&P 500 and a pullback that was “large” relative to the pullbacks since the run up in early November. The pullback found support at the 20 day MA, not one that I usually look at, perhaps it is time to keep a closer eye on it as breaking that level could see a deeper pullback to the 50 day MA.
To take note of: A deeper pullback will not signal an end to the bull run, maybe the start of a change in trend, but unlikely to be a reversal of trend. Make a distinction, reversals in trend usually happen over time and we are a long way from that.
There is now a reference for the first level of support, 2350, the zone of the 20 day MA and Thursday’s low. Below that is the 50 day MA, currently at 2310 and the 2280/2300 zone of previous resistance. Lots of support.
Resistance is at 2400 which is the latest pivot high, above that I can only guess at 2425/2450.
Where does this leave me on my 3 trading methods:
Trend Following — You may have noticed, there has been little change to my S&P chart over many weeks and is a reflection of the relative ease of trading with the trend. There is little need to change anything when there is a trend, only manage open positions and let them ride for as long as the trend continues. For now I do not have any reason to change anything.
Mean Reversion — The pullback got me into my max position allocation and far more activity this past week than I have traded for many, many weeks. Now it is a matter of waiting for my exit signals and whether there is a continuation of Friday’s move which will likely see me exiting with profit, if not I will take the loss. All part of trading.
Swing — I still have my open position in ILF and added a long position in TNA, both currently with an unrealised loss.
Conclusion: Pullbacks and corrections are needed in trends, as price gathers momentum for the next leg. With the amount of support below, I still favour a continuation of the bull trend, however I am aware of any factors that can change that and I will act accordingly. For now I remain a dip buyer and letting my trend following trades run.
Have a listen to the interview I did on the Desire To Trade podcast, link below.
Show notes page: http://www.desiretotrade.com/miguel-tiexiera/
If you would like to know more about my trading methods, contact me on any of the links below.
Miguel — TravelingTrendTrader
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LinkedIn: Miguel Teixeira