US Indexes: Read the emotion, predict and understand the future.

Dealing in facts and logic, will always give you the best outcome. Using real data and reading between the lines is something anyone, in any walk of Trading can conduct.

This story is one that you can see a mile off and one you can use to understand the natural order in which Markets actually work. Within the jungle of trading strategies that rely on all sorts, the only thing that actually remains as a fact is that people who make money buy low and sell high, regardless of timeframe or capital.

You see, price movements, are ruled long term by market sentiment, relating heavily to the fundamental aspect(s) of trading. If people are interested in buying, or selling for a longer term move, they will normally do so based on either fear of a fall, or optimism/hope of a rise. In between this is the use of price points and price action to get better deals within the overall move.

These two emotions are commonplace because they provide necessity. People who are worried their investments may degrade in value will normally look to sell them at the next available price, because its a necessity that they get the most value (or atleast they think) for the value of their contract, asset, whatever it is they've invested in.

People who believe that their asset is undervalued and could, or maybe should cost more are likely to hold on the necessity that similarly they want to get the maximum value from their holding. It is natural to feel both emotions and they can be either a determent or a benefit to ones decision making. That's for another time, but in this instance, we can read both emotions via charts to determine what to look for in the future.

Clear examples include, most recently, the crash in 2008 - 2012 and onwards recovery and growth in the US stock market. The Covid crash of 2020 and its subsequent boom in economic activity, followed by economic fears from war and money spent during covid bringing the market straight back down for a 50% Pullback/retracement, before rising further on improved optimism and sentiment.

As you can see, on basically any chart, after a large rise comes a large fall, or at least somewhat of a fall. Its practically always after a period of intense optimism and belief that an asset will rise in value over time, not that day immediately, but at some point in the future. This hope drives prices higher and higher, but ultimately, they will always reach a saturation point.

Similarly prices that fall for long periods often are followed by a larger rise to the upside on fading fears of a further fall. This is because they belief the market has finished falling, and it will now rise, or indeed that is has gone too low. Often in this case, the larger money market will be liquidating entries to gain the maximum value for their position.

Whether you are looking at a rise in market value, or a fall in market value, the fact remains the same. It is, logically, and historically prove-able that you will be better off shorting at highs and buying at lows, or indeed, buying when traders are fearful of further falls and selling when they are hopeful of higher highs, hence the saying, 'buy low and sell high'.

This, of course must be done in proportion, because selling with maximum leverage over your entire equity is obviously going to run the risk of total blowout of your trading account, which is not sustainable. Your risk, size and leverage must be inline with the potential for further up-moves, other open positions, and your equity overall.

The current state of the US Index Markets is totally inline with the above. When looking at the S&P 500 Futures markets, you are at the point of optimism. Investors are buying on belief and changing economic data/anticipation of the likely success of the future US economy, just like they have continuously throughout history.

So therefore, I would rather be short. This is entirely different from saying that I do not think it can go higher. I'd be absolutely not shocked at all if it does, as that is where sentiment is going. But I do know, that historically, if I am short in proportion at highs and high market value (in proportion with equity management rules) I am to be better off. This is the mind of all profitable traders/institutions alike.

Whether the Market will rise or fall, is entirely open to interpretation. But it is a non-negotiable fact that ultimately, there will be a reason for fear in the Market as things change from an economic stance, or atleast the mood of Traders changes. This could be today, tomorrow, next week..

Coming very soon, we have US CPI data, FED Comments and further hints from the FED reserve in regards to monetary policy/rate changing. This will feed into markets as again, traders and investors alike look for the indication of recovery and market mood.

Remember, buying highs is just a bad idea. This is the reason for the extremely high rate of failure in trading.

I hope that helps. Trade it small.

Comment:

Maintaining short bias.

Comment:

Continued short into this week.

Comment:

Some shorts taken, only Re long @ 4600