\*All rights reserved! Redistribution of this publication is strictly prohibited. There is substantial risk of loss in trading futures and options.


*All rights reserved! Redistribution of this publication is strictly prohibited.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results

On the radar:

* The S&P experienced a shallow correction, in February, but we seem to be poised for a seasonal rally extending to 2180ish.

Weekly S P March 2015 final

Seasonal tendencies suggest the S&P pullback was temporary, new highs ahead?

Uncertainty over the timing of the Fed’s imminent rate cut triggered some momentary profit taking in equities. However, investor prudence to lock in gains didn’t mean the bull was dead; or even sick. There are some potent seasonal tendencies working in favor of equity market bulls. Specifically, the equity markets have had a propensity to climb in late March through much of April (ignoring the typical tax deadline decline).

In further detail, MRCI (Moore Research Center Inc.) statistics reveal that buying the S&P on, or about, March 15th and liquidating the trade on April 29th has produced a profit 87% of the time, or in 13 of the last 15 years. A similarly high probability proposition has taken place in the Dow from April 14th to May 3rd. Even statistics spanning over the previous 30 years points toward firmer equity index prices through April. Accordingly, we prefer to assume the current dip, although likely not over, will prove to be a temporary detour in a continued bulls run.

Aside from seasonal tendencies, the S&P has the chart on its side. Not only are we in an established up-trend, but there are multiple tiers of trend-line support that could come into play if fundamental uncertainty temporarily interferes with the bull move. I first looked to the weekly chart to establish support levels, and then used a daily chart to corroborate my findings. In the end, it I discovered that both charts agreed. This agreement provides a little more confidence in the analysis.

As a preemptive disclosure, the current market pricing is neither here nor there when it comes to technical analysis. We aren’t necessarily overbought, or oversold; nor is the S&P near major areas of support or resistance. Instead, current market valuation is relatively “fair” according to charting models. With that in mind, pricing doesn’t justify being overly bullish at current prices, nor does it call for shifting toward a bearish stance. In my opinion, traders and investors should be cautiously looking for a continuation of the rally but should be willing to change sentiment in the coming weeks or months as the market approaches resistance areas.

Daily S P March 2015 final

On both charts, the initial support level falls near 2041 (tested last week). As long as 2041 holds the bulls are in full control forcing prices into the 2150/2170ish area. The reaction to Wednesday’s Fed meeting suggests that the March 11th test of the 2040 area might have been the conclusion of a shallow pullback.

In previous pull-backs in the S&P we saw the RSI on a daily chart fall into the 30 to 40 area before the market recovered. Last week, we saw the RSI on a daily chart reach 40 before the indicator and the market reversed trends. We would have preferred to have seen a reading into the 30s because it would have been a more attractive set up for the bulls. Nevertheless, the path of least resistance should be higher assuming Greece manages to take care of business.

Although we believe the market will continue to grind higher to extend the post-Fed rally, looming event risk in Greece, and other areas of the world, should keep traders on their toes. If a fundamental shift in the European Troika negotiations, or a flare of violence in Ukraine, make their way back into the headlines, we could see reactive selling that brings the S&P below 2040. A break of this level would likely lead to a quick move into the high 1980s (as marked by an internal trend-line), and possibly even the high 1940s which would be a test of trading channel support extending from the December lows and through the January and February low. We aren’t expecting this to occur at this point in time but should these prices be seen, they will likely be temporary and could prove to be great opportunities for the bulls.

As noted, we believe the up-trend will eventually bring the market to the noted level near 2170 to 2180, but we doubt the S&P will push beyond such levels on this pass because as bullish as seasonals are in the coming weeks, they begin to fade as we get into the mid-summer months. Thus, if you are a bull looking for a target area to lighten the load, or a bear looking for a place to get comfortably bearish, the chart is suggesting 2180ish might be an optimal area.

When analyzing the S&P, we often look to the Russell 2000 index which is considered to be a market leader amongst futures traders. The Russell 2000 is a broad based small-cap index that can see substantial volatility; yet, during the most recent S&P decline it managed to grind higher.

Weekly Russell March 2015 final

We aren’t saying the Russell won’t pause to digest the rally, but we believe its resilience is a sure sign of overall market strength. Thus, it leaves us with the mindset that for the time being, any large dip in equities will likely be bought into.

At the moment, the Russell 2000 is slightly overbought as indicated by technical oscillators such as the RSI (Relative Strength Index) which measures market momentum, and Slow Stochastics which is used to identify overheated markets. Both of these indicators trading at slightly lofty levels suggests some caution should be warranted; in such an environment, the market is susceptible to profit taking. With that said, we suspect any price decline will find support near 1200, but if panic ensues 1170, or maybe even 1120, could briefly be seen so traders will want to be prepared for this possibility. If we are wrong about a continuation of the rally, the bears will be targeting 1050.


In conclusion, the equity markets appear to be on an upswing which should extend well into fresh all-time highs. Conversely, the seasonally bullish time of year for stocks will be coming to an end as we move into the mid-summer months. Thus, should this upswing in the S&P find its way into the 2170/2180 area, it will likely be time to begin preparing for the possibility of a larger correction.

*There is substantial risk of loss in trading futures and options.


If you are enjoying this trial, Click here to open a trading account to work with DeCarley Trading and/or use the state of the art futures and options platforms available to our brokerage clients.

DeCarley Trading (a division of Zaner)






Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.

Seasonality is already factored into current prices, any references to such does not indicate future market action.

There is substantial risk of loss in trading futures and options.

amazon facebook instagram linkedin skype twitter youtube