Short term
Trade view / 27 May 2016 at 8:06 GMT

Attractive risk/reward for SP500 bears ahead of data

Instrument: US500.I
Price target:
Market price:
Background

The bull run off the February 11 lows has been exceptionally strong, especially for a move that has the appearance of an Elliot wave three wave sequence. At the lows back in February bearish emotions were running high and at current levels bulls are now, if not the loudest, having a better feel about things as we are back at the highs.

The SP500.I (US500.I) peaked on May 20 last year and has since that time made lower lows and lower highs indicating weakness, the question is how weak! The punt from the December highs last year into those February lows was a five-wave move and the current bounce appears to have been in three. This type of structure isn't likely to be followed by massive upside into new all time highs, at least not before a larger pullback.

From a time cycle perspective there is an interesting alignment showing measuring the move from the May 20 highs last year into the February lows this year, it took 267 calendar days ending only two days off a perfect hit. The rise from this low into the April 20 peak took 69 days ending on EC on the Gann wheel this giving us a possible 360 degree alignment, meaning odds of a trend reversal are descent.

Resistance is found at 2,110 then 2,117 and 2,135. Support is found at 2,044 and 1,955 and 1,864.

Risk/reward appears very attractive for shorting this index, either for longer-term bearish position or a shorter-term play for a movement into and towards the May 6 and May 18 lows. In this trade view we are looking at the shorter term for starters. If it works out short term, well then we have something to build on for later.

Management and risk description

The plan is to short the SP500.I (US500.I) at market around 2,090 for a short-term move lower into and towards the 2,044 level, the stop could initially be placed at 2,110. Ideally price will be contained below 2,094, above this level risks of a break above 2,110 are substantially increased.

There is GDP data out of the US today as well as a speech by the Fed's Janet Yellen, one might wan't to await this before engagement.

US cash markets are closed Monday.

Parameters

Entry: Sell at market but below 2,094

Stop: 2,110

Target: 2,044

Time horizon: Ideally one week but up to two weeks

SP500.I daily chart
SP500.I daily chart
Source: Saxo Bank. Create your own charts with SaxoTrader click here to learn more 


SP500.I hourly chart
SP500.I hourly chart
Source: Saxo Bank 

SP500.I daily development chart
SP500.I daily development chart
 Source: Saxo Bank

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
30 May
DudetteUK DudetteUK
Same risky business as the NQ trade but I agree with you that the R/R is getting attractive
31 May
Johan Berntorp Johan Berntorp
Attached is a pivot chart, horizontal lines are key pivots for the US500. As an example we can see how important the 2 094 level appears to be.
01 June
DudetteUK DudetteUK
Good morning Johan. How do you draw those pivot lines please?
01 June
Johan Berntorp Johan Berntorp
I derive them from the Gann wheel's Cardinals and crosses as well as 180 and 360 degree's of important tops and bottoms. Value used here is 2 137 if I remember correctly.
01 June
Johan Berntorp Johan Berntorp
Some are more important then others.
01 June
DudetteUK DudetteUK
thank you. I will read about these today. Have a good Wednesday!
10 June
DudetteUK DudetteUK
we are getting there despite a slow start. do you still have the same targets in ES and NQ please?
10 June
Johan Berntorp Johan Berntorp
If downside momo can get traction, yes. 2094 still important. Problem is price oscillates though it though.
10 June
Johan Berntorp Johan Berntorp
If we can break 2094 and then come back for a te-test without punching through...time alignments are out of sync though which is disturbing.
10 June
Johan Berntorp Johan Berntorp
On the positive note for our case NQ is looking much better.
14 June
DudetteUK DudetteUK
I've bought back my shorts this morning, the Dax has completed a nice AB=CD on the Daily, so I prefer to jeep some powder dry in case of a squeez
14 June
Johan Berntorp Johan Berntorp
Great if you came out green!
14 June
DudetteUK DudetteUK
:-)
14 June
DudetteUK DudetteUK
That shooting star on the US Tbond might help me!!!

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