Trade Setup For July 28th

Here are the zones I am watching for July 28th:

Resistance

1256-1257
1262.75-1263.75
1269.25-1270.25
1277.25-1278.50

Support

1251.50-1250.50
1246-1245
1240.25-1239.50
1233.50-1232.25

My Outlook

At this point my view is neutral with a slight bearish bias. The charts are showing some downward mannerisms though the 1250 area has stopped the SP in its tracks twice now. I am still waiting to see if we continue the move into lower lows or if we find support prior to reaching the previous low. Until it becomes more evident I wouldn't want to put too much weight on either side.

The VIX appears as though it could be gearing for another run higher. The way it is looking, the put option demand is in a position to increase largely. It could go either way though so I will keep my eyes on it this week.

The equities saving grace last week was the decline of Oil and Gold. It has a long way to go if we are expected to use it as a step to bringing stocks back up to scratch. We could possibly see Oil make another move upward which runs out of steam prior to reaching its highs. This could lead the stocks to new lows and present what I might consider a selling extreme. Should that be the case, I would then look for signs of a bottoming market more closely. At the same time Gold would also need to show a decline as the USD possibly strengthens as traders move away from the safe haven.

The USD does appear to be getting some balls back. Against the AUD we have seen it gain hardly any ground since late May. Against the JPY it has been gaining steadily since March this year. Against the EUR is has hardly made any ground since March this year. This does signal to me that buyers of the USD are having a hard time pushing it higher at this point.

So for me, these things do possibly tell me a bottom could be coming in the next 1-3 months. I'm not a fortune teller though so I could be completely wrong. If things play out in an ideal fashion, it should equate to strength coming into the US economy and the market.

My Focus

Currently we are hanging around the 1252 area in the overnight market. I get the feeling we could see a gap beneath the 1250 area at the open. If that is the case, then I would look for some weakness to hit the market if we reach the 1251 area.

If we meet the 1257.50 area I would also be looking for some possible weakness to be shown through the Tick and Volume. It is a messy area in between 1251 and 1257 though so I'm not crazy about a trade there. Again I will only be testing the long side once we pass the 1263 area for the moment. Unless of course we get a strong extreme selling reading at a support level beneath there.

I am sticking with the trades only at s/r levels as they are working well for me. I am continuing my casual approach to my trading as it is loosening me up a bit. I was more relaxed last week with my trading which was good to see. I converted across to the live account with my short trades well. The Wednesday was a bit rough but some good lessons were learnt.

I am keeping the stops tight and initial targets will be in easy to reach places. The second position is trailed if the first target is met.