Do support and resistance work on indices?

[murray t turtle]

Yupp. Aside from traders believing they are important causing a self fulfilling prophecy, there is also options dealer hedging activity causing price to behave differently around certain levels.

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True in most any market;
some tend to do much better, like tech stocks/etfs. Maybe SPY is not so good in FEB, but this month is almost over........................................................................................SPXU + SH is different, but sometimes can find some profitable patterns.I liked to look @ real estate when its raining\ down pour\ they knew you were serious/LOL

 

[nattybumppo]

I can imagine the concepts of support and resistance might work for individual stocks, or maybe for Forex. This is because I can imagine traders trading in these things by for example, value investing when prices fall above a certain level, or profit taking when they climb to a certain level.

However, I wonder if this is the case with indices, as they are more removed from the underlying asset being bought and sold. Do traders really buy and sell at these levels for similar reasons?

Does anyone here have any thoughts on this?

S&R absolutely work better than chance on major indices. You can draw trendlines and watch the next pullback to the trend line bounce off of it more often than not.

 

[Blitzjoker]

Thanks for the responses on this. I have done a small amount of research on my own chosen instrument, the Dow 30. Although there are some likely looking support and resistance points from time to time, it is hard to say whether they are likely to be tradeable, or if they are just a trick of the mind to see patterns that are not really there. I’ll have to write some code and test it. Intuitively it seems more likely that such levels would occur more on stocks and commodities, as presumably traders sit on the sidelines waiting to invest in them (or cash out) at certain price levels. But maybe they do it with indices too.

Looking at the charts, I'm still doubtful, but I’ll crunch the numbers at some point and have a better look.

 

[murray t turtle]

Thanks for the responses on this. I have done a small amount of research on my own chosen instrument, the Dow 30. Although there are some likely looking support and resistance points from time to time, it is hard to say whether they are likely to be tradeable, or if they are just a trick of the mind to see patterns that are not really there. I’ll have to write some code and test it. Intuitively it seems more likely that such levels would occur more on stocks and commodities, as presumably traders sit on the sidelines waiting to invest in them (or cash out) at certain price levels. But maybe they do it with indices too.

Looking at the charts, I'm still doubtful, but I’ll crunch the numbers at some point and have a better look.

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I have traded UDOW + DDM but that low PE stuff tends to go low, go low\go lower...................................................................................... Most milion$ are made in the stock market by buying every month for 40 years + market makeing/specialists..

 

[SunTrader]

One chart won't do it. Hmmm Neither will a second one I'm sure. But here it is nonetheless another one of SPX 1 minute, not a Dow fan, with red support turned to resistance lines (naturally with this heavy selloff day) and magenta (50%) and blue (61.8%) fib retracements. Yup I've found long ago they work too no matter the naysayers.

 

[Blitzjoker]

One chart won't do it. Hmmm Neither will a second one I'm sure. But here it is nonetheless another one of SPX 1 minute, not a Dow fan, with red support turned to resistance lines (naturally with this heavy selloff day) and magenta (50%) and blue (61.8%) fib retracements. Yup I've found long ago they work too no matter the naysayers.
View attachment 253128

Thanks for this. Actually I thought your previous chart was good too. Possibly the Dow is too volatile to have these more solid looking levels.

 

[comagnum]

Yes, trading based on how price & volume act at support/resistance can be very lucrative. There is a great deal of discretion involved that will come with experience, so start out small.

The 3rd test of a key level can often trigger a big reaction. Failed breaks of S/R tend to make the largest moves.

 

[Overnight]

Yes, trading based on how price & volume act at support/resistance can be very lucrative. There is a great deal of discretion involved that will come with experience, so start out small.

The 3rd test of a key level can often trigger a big reaction. Failed breaks of S/R tend to make the largest moves.
View attachment 253134

Boo hiss Mr. Gumby. EVERYTHING broke down in that period you highlight in that chart. Except the VIX and all those inverse ETFs.

 

[comagnum]

Boo hiss Mr. Gumby. EVERYTHING broke down in that period you highlight in that chart. Except the VIX and all those inverse ETFs.

Well everything else was not at a multi month resistance level offering a well defined risk level.
Are you worried what ETFs are doing when your a riding a parabolic breakout - I sure don't. Your splitting hairs & missing the point which is trading S & R levels.

 

[treeman]

Yes, trading based on how price & volume act at support/resistance can be very lucrative. There is a great deal of discretion involved that will come with experience, so start out small.

The 3rd test of a key level can often trigger a big reaction. Failed breaks of S/R tend to make the largest moves.
View attachment 253134

Never buy right before supply.