Today we are tracking SPDR S&P 500 (AMEX: SPY) which trades exactly like the S&P 500 and is the most liquid equity ETF as it trades over 161 million shares a day. The tracking of SPY and its key levels helps any trader to avoid buying at the wrong time or shorting just before a intraday rally.

Erlanger Value Lines are designed to identify key levels for the intraday trader or for anyone trying to establish a new position during trading hours. The Value Lines fall into three categories: Support and Resistance, Extreme values and Range values. From a practical point of view, the Value Lines can act as targets and triggers for short-term trades.

Some investors think it is uncanny how these levels stop or turn back short-term price swings. We do not. Why? Because both high frequency traders and program trades have built these levels into their models which cause them to gravitate to resistance, pivot or support along with range values like the 5 and 60 minute ranges. Here is the sample chart for static analysis and today’s chart and today’s intraday pivot analysis will follow.

• If price moves above the red Resistance value line, then the intraday bias turns positive: A positive bias reflects times when only long trades are considered.
• If price moves below the green Support value line, then the intraday bias turns negative: A negative bias reflects times when only short trades are considered.

TODAY’S ERLANGER CHART FOR THE S&P 500 INDEX & ANALYSIS THEREAFTER:

On today’s chart action, Phil Erlanger says, “Friday saw the SPY along with Dow Jones Industrial and S&P 500 close above resistance.The Russell 2000 closed between resistance and pivot on Friday. Today we see SPY trading resistance to pivot after opening above resistance. Often times this is a negative when resistance is broken to the downside on an open. Wait to move back above $133.72 to establish new long positions today. A break of pivot which is $132.51 would be an opportunity to get short on an intraday basis.”

• If price remains within the green Support and red Resistance value lines, then the bias is neutral. The pivot line can be used to establish an intra Value Lines bias. Pivot to Support is negative and Pivot to Resistance is positive.
• If price remains within the first hour high and low value lines, then the bias can also be viewed as neutral. This is especially true if the first hour range is inside the range set by the support and resistance value lines: A neutral bias reflects times when both long and short trades may be considered or (depending on the traders style) a time for no trading. All Erlanger Value Lines can be used as short term target levels. This is especially true if a few are clustered together.

The Erlanger Value Lines can be accessed via Erlanger Chart Room (www.erlangerchartroom.com). Given that we are using real time data, Erlanger Chart Room will require a subscription to eSignal Q Charts or access via Bloomberg’s data api. Sign Up For Erlanger Chart Room.

June 11, 2012

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