YaKa
Short

Equities - SP500 Warning

CME_MINI:ES1!   S&P 500 E-MINI FUTURES
344 14 5

This could be an important message. After this email, I ll go back to business as usual.

My own psychology assessment:
- From November to December, I was looking forward to a major correction.
- Then with time passing and the market proving me wrong, my brain subconsciously started to build the opposite view.
- I know that when I change stance after 2/3months, there is a risk that is when the market makes the move I previously thought of.
- So yesterday, as 2150/April15 was starting to build as my base scenario, I realised I may have capitulated close to the rupture.

In normal business:
- There is support at 1990, 1930 and 1880, any of which could retain the market.
- In this condition and using the last 2year Pavlov behaviour, buying 1950 (+/- 3%) seems like a sound plan with target 2120/2160.

But, there’s a growing risk:
- At some point in the next few months, SP500             might fall 10% in one week (15/20% in total)... it could be soon rather than after widely expected completion at 2150.

A few things:
- Since September 2014, the moves are getting sharper in a narrower space.
- Large corrections have a 13days structure (3 weeks).
- It take only 5 nasty days to change the picture.
- The volatility is slowly pointing up and is diverging since June 2014.

Absurd reasoning:
- To climb sustainably, SP500             would have to change regime and move slowly again to achieve 150pts up over 3 months.
- This required change in regime remains to be seen and is unlikely as is.
- Also, it seems to me that the resistance becoming widely recognised, going back up to hit again around 2120/2160 would provide a too easy reversal target.
- Completion of wave 5 of 5 of 5 of III             is a bit too academic. This wave is often missing from charts ahead of big reversals.

Risk: a crash in the next 2 weeks.

Dilemma: Draghi on the 22nd of January. It is more difficult to bear a short through supports with this coming.

Your thoughts on the subject are welcomed.

Trading:
- My initial plan was to unwind shorts at 2000. I may keep a portion of it now.
- Clearly I will not attempt longs other than in a very tactical fashion.
- Maybe the right thing to do, is to avoid losing money if the market falls but not necessarily making money on the tail of the move down as it will provide great opportunities in relative strength versus the market.
- If I had had this last policy in place, I would have made much more money in the last year.

YK

Related Ideas

Mocean
2 years ago
Good notes.... I don't trade S&P500 but wondered if there is a correlation with the USD Index - approaching upper Channel?

snapshot
Reply
YaKa PRO Mocean
2 years ago
if the market crashes in the next few weeks... I think you could have an excess above that line...
the way the market trades right now:
wti down.
vol up
equities preparing a nasty move down.
usd could appreciate further in rush mode.... Or change course (less likely but possible as everything could turn)
Reply
Mocean YaKa
2 years ago
They maybe inversely correlated - if there are signs the US will increase interest rates earlier, Equities were funded with cheap money - Equities traders may dump if servicing the debt increases and the potential gains are limited.
Reply
YaKa PRO Mocean
2 years ago
Yes - Plus add that at some point, a strong USD affects Earnings repatriation which is not priced for right now...

Amazingly: US equities performed better than european ones with a USD 15% stronger... That has to mean revert at some point..
Reply
jangseohee YaKa
2 years ago
For Christ sake, Yacine no CRASH will happen, just major correction perhaps :-)
Yellen and Draghi consider "CRASH" as a taboo word
Reply
YaKa PRO jangseohee
2 years ago
for me definition of a crash: more than 10% down over 2 weeks... that can happen anytime...
Counter intuitively: I think an equity crash without credit issues would serve their purpose as they could push their real economy agenda without overheating risks
Reply
jangseohee YaKa
2 years ago
10% in 2 weeks, that's very lenient of you :-)
Reply
elp
2 years ago
This is what I am thinking if october lows areclearly taken out?

snapshot
Reply
elp elp
2 years ago
Also looking at a long term cycle window at the end of this year, real price and actual price pointing eoy cycle window. SP500 Real Price
snapshot
Actual Price
snapshot
using all time low and 1932 low as anchors, the 1987 crash was in the #2 cycle window, makes me wonder what cycle #3 will be like? At lows or highs before a big correction?
Reply
jangseohee elp
2 years ago
Hi El puerto,
you can paste your chart by
1. clicking the "lightning" at right top of comment box
2. insert your chart/post
3. comment

thanks :-)
+1 Reply
YaKa PRO
2 years ago
fitting draghi in and assuming he will manage to lift the market, that is the most crazy scenario possible.
snapshot
+2 Reply
YaKa PRO YaKa
2 years ago
at 2000, i will unwind my shorts and see how it deals with the support..
at 2130, no doubt: i would re-short like a pig.
+1 Reply
jangseohee YaKa
2 years ago
yeah Why not, megaphone still in play in big picture, the only unknown is the detail route map!
Reply
reluctantplumber
2 years ago
It is good to look into one's self.
Reply
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