SP500 - 2070 - SELL THE NEWS

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Change of stance.

- Sell 2070 on SP500             future.
- Sell 10,550 on DAX             . (this time I prefer to short the US)

1 – The news is well priced and was kind of leaked without tremendous upside.
2 – Earlier this week, I thought the market would climb to 2070 before the news and the market could climb another 3% after the news – did not happen.
3 – Key European bonds are already trading very tight and it is unlikely this QE can drive yields lower and provide a substantial boost to equities.
4 – Monthly statistics are stretched
- DAX             that moves on average 700pts a months and is already 1000pts wide this month (1200 at 10550).
- SP500             that moves on average 95pts per month, will reach that target at 2070.
5 – From a game theory point of view, the capping zone is well known now and a breakout that does not complete to speed limit could be the trap/signal missing.
6 - The volatility has not abated – the moves are very wide – I read this as very unhealthy. I don’t know any precedent to compare this with.
7 – The apex of the cone is getting very narrow – I find a bit too easy for the bulls to enjoy more upside to their final 2015 target.

Other comments:
- Gold             may end up reaching 1340 and may initially benefit from the QE and the correction.
- Oil             which had its own life could be floored at 44 and XLE             could move up.
- In the EM space, I thought Brazil could go up. Could this hold true if the rest of the market corrects. Possible.
- EURUSD             – not sure but clearly it will drive the relative performance of US versus Europe.

Risk Management:
Short 40% SP500             at 2070 and watch until the end of the month – Time stop 1 week.
On SP500             , the risk is an extension to 2140.
On DAX             , the risk is an extension to 10,100.
In both cases, if the risk limits are not breached, the levels Shorted shall be seen again before further upside.

Other trading:
Short 5% USDIDR             , the chart is a perfect range over the last 20Y
Bund             – SHORT 158.50 if provided (it is probably falling already and I am already short 60% at 155.80)
Another great post Yacine! I was looking around the same level for resistance. If jan highs are clearly broken, then it would open up all time highs. However if Jan highs holds as resistance, imo October lows to highs hwb could be a level of support for price to rip off. Break the hwb and 61.8 would open up October lows. Also looked at QE 1 2 3 and OT, price rallied after each QE announcement into resistance, QE 1 was a month of sideways chop, QE 2 & 3 rallied a few days into resistance before selling off. OT just sold off. The average % correction for QE 1 2 3 & OT is 13% that would put the spx near October lows if there is a correction. where ECB QE follows a similar path of FED QE.
I must say my conclusions have not been stable in the last 2 weeks but right now a move down a few days after annoucement is my base scenario...

Surely an important junction for the market with lasting impact
elp YaKa
Yes the market is at an important junction. Have been following the DOW too and it ran into a fib extension where price reacted off it on a monthly chart. I don´t think it´s coincidence either. 2008 ran into a -23,6 and corrected so I am taking caution here from left of the chart.
+1 Reply
elp elp

yes. below 17100.. opens a roller coaster - needs confirmation there
+1 Reply
Can you really use fibonacci projection in linear over such a long period?
1 point in 1900 is huge, now irrelevant...
I guess there is no definite answer to that.
elp YaKa
Time & price don´t know or understand logarithmic or linear, that is only us, we give power to it. If I notice price is reacting to either scale, where price is respecting it, I take notice.
elp YaKa
Price levels from fib extensions don´t change from either scale, only trendlines change.
If you saw it working on this scale - then i trust you.
so in conclusion we have:
Market could go up 2% in the next 2/3 days. To monitor if climbs more.
If market falls 3% from here after the news then, we have a sell confirmation.
As usual, the good level to short is before confirmation.
The confirmed level is difficult to manage from a money management point of view.
+1 Reply
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