Monday, May 7, 2012

Trend: S&P 500 futures signal downtrend

The S&P 500 has moved into a downtrend if I count after-hours trading of e-mini futures on the index.

The index gapped down from Friday's futures close of of 1362.50 to at open at 3 p.m. Eastern on Sunday of 1354.00. That's trading in Asia and was doubtless keyed to the French and Greek election results.

From there the price dropped to 1342.50, and has since recovered top above Friday's close.

The prior low on the futures was 1352.50 on April 1, so Sunday showed a lower low on the futures.

The May 1 high from which the price began a decline was 1411.75. The prior high before that was 1419.75. So the futures show a high followed by a lower high.

Lower high lower low -- that's a downtrend.

The index itself and its exchange-traded fund avatar SPY don't show the lower low because they trade only during New York exchange hours.

It's up to each trader, of course, to decide whether to give credence to after-hours trading. I tend to base my opinion on what happened next.

If the price upon the market open moves back to the prior in-hours trading range, then I tend to ignore the after-hours extreme. If the price remains below the in-hours range, even if that doesn't produce a lower low within normal trading hours, I tend to use the after-hours low in reaching a trend decision.

In this case, the S&P 500 futures moved back above Friday's low at this morning's opening in New York. So that would negate the downtrend.

But the downside blip did happen, and I shall keep it in mind as I make my trading decision over this week.

Note: I won't be filing a stock analysis today. I have a conflict. I'll make it up by filing two on Tuesday.

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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