How to Find Bottoms for the SP500, Dow, Nasdaq and Russell 2K

Jan. 10, 2011 - PRLog -- It was a great first week in the market for 2011. Volume picked up as traders slowly return from holidays focusing on the markets again. Looking forward volume should continue to expand because there will be more traders in front of their terminals excited to see what type of money they can make in 2011.

Let’s jump into what happened last week. On Friday the market generated a short term trading signals to go long SP500, Dow, Nasdaq or Russell 2k. This trade seemed to fall on a perfect day because if we look back over last year’s weird trading characteristics typically if you were to buy on a Friday and hold a position until Monday it would have netted you a profit. Well on Friday the market had a very nice intraday pullback to a level which there was strong support so we bought in with a small position.

Let’s jump into the charts for a visual of what I am talking about…

SPY – Daily Chart & Moving Averages

This chart shows the big picture. Currently we are in a strong uptrend and looking to buy significant pullbacks to key levels of support, and that is exactly what we had last week.

The market pulled back to a level which has support:

1. It pulled back to the 14 day moving average

2. It pulled back to the previous weeks high

3. It pulled back to a support trend line

Each of these levels happen are at the same level and each type of support will attract a different type of trader, meaning there should be a lot of individuals covering their shorts and or buying at that point.

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