Patience On S&P 500


(click for larger and clearer image)

The S&P 500 has had quite a run since September, despite the choppiness since March. Ritholtz is now cleverly short via the ETF space and I think it’s a good call. But for emini futures traders, it’s a little more tricky.


(click for larger and clearer image)

We are all looking at the same charts, but here’s my take. Friday’s settlement of 1296.25 is about 3.75% below the downtrend line, which is all the way back up at 1345. Coincidentally, 1296 looks to be at near-term support, with the next level of support down at at 1255, just eye-balling it.

So what to do?

For the best reward-to-risk trade, I’d wait for the contract to rally towards the downtrend line and sell the reversal. The lowest risk to you would be to sell it short as close to the downtrend line as possible, but the price will tell you what you need to know.

The trick is to take your profits BEFORE the snap-back rally. In the chart right above, that would have been at Friday’s close around 1296.

If you’ve gotten short by selling a 20-day low, I’d say that you’re in a tough spot now. You’re likely short at about 1300 and change, looking to add more to your position in what I’d consider an oversold market. That’s not a risk that I’d be taking right now.


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