Friday, 8 April 2016

What will you do?

What will you do, when the sp'500 is in the 1600/1500s? What will you do when the VIX is looking spiky in the 50/60s ? If you continue to short.... what will you... become?

sp'monthly3d - double top

sp'weekly8e - 'failed head test'


(yeah, I'll use any excuse to drag Star Wars into a post)

Okay.. first... it will still take some weeks before there is high clarity that sp'2075 is another in the series of 'marginally lower highs' from May'2015. For now.. things are looking okay, but after the current initial retrace is complete... we'll need to see the market bounce, but again fail to break a new high.

re: monthly3d.   The ultimate issue - since summer 2013, is that the market will want to eventually back test the 2000/2007 double top resistance (now support) around sp'1650/1550.

Serious trading implications

There will be EXTREME risk the market will floor, and then begin a new multi-year ramp - whether based on further QE, a switch from bonds to equities (as Armstrong et al suggest), or a result of huge capital inflows from desperate investors (trying to find financial sanctuary) across the globe.

What am I planning?

If by some semi-miracle, I can trade the market from the sp'2000s to the 1600/1500s... I'd implement a 5-10% max short rule once sp'1600s.

I'd only feel comfortable re-ramping shorts if I saw a monthly close in the 1400s, which would offer further significant downside to the 1100/1000 zone.

For now... the latter downside zone remains fantasy land for the doomer bears, and I honestly don't think we'll fall that far.

re: weekly8e

First, note the current blue candle... initial sign of a turn.

There is a valid H/S formation on most indexes, and unless the bull maniacs can break above sp'2116 (Dow equiv' 17977)... the 'failed head test' is a valid argument - as lead by Oscar Carboni.

From a pure risk/reward standpoint, we have one of the best setups in many years. Whether a trading stop at sp'2075, 81.. or even 2116, the risk is relatively minor, verses potential downside of around 25%.

Looking ahead

Friday will see Wholesale trade data (10am).

*Fed officials Dudley and Kaplan are on the loose, but I'm inclined to believe the market will be more focused on other things, not least the Yen.

As for the next Star Wars movie - Rogue One, just from the teaser, it looks pretty damn good.

BULLISH Star Destroyer

Goodnight from London - once home to an Empire.