The key point of this analysis is the strong pivot level on $SPX around the price range of 4100-4150. This area has acted as support and resistance several times this year, which is confirmed by being the area with highest volume on a volume histogram for 50 days, and a volume histogram for 200 days.
Bearish Signals:
Bullish Signals:
Overall, it seems more likely to me that this is a bull trap than a bear trap, which will move into a resistance level then reverse down, so I will continue shorting at the current price, but if the price continues to rally to above around 4170, then I will reverse my position into a long, as a breakout could easily pop towards the upside given the strong short term momentum.
Bearish Signals:
- Since prices are coming from beneath, this pivot level is likely to act as a resistance level, preventing the S&P from rallying further up.
- The 20-14 period regression channel indicator still gives a bearish signal for trend, and the S&P is trading below its SMA 300 (the thick red line)
- My RMA indicator shows that there were two days when the stock was oversold recently
- According to CBOE, on September 9th the SPX put/call ratio was 1.36, which means there's more puts than calls
Bullish Signals:
- From a trend channel perspective, $SPX is currently following a descending broadening wedge pattern, which is generally seen as a bullish signal
- There was recently strong momentum, with two gaps, so a breakout could happen out of the trend channel, which would be very bullish.
Overall, it seems more likely to me that this is a bull trap than a bear trap, which will move into a resistance level then reverse down, so I will continue shorting at the current price, but if the price continues to rally to above around 4170, then I will reverse my position into a long, as a breakout could easily pop towards the upside given the strong short term momentum.
Trade closed manually:
SPX looks like it is starting to accumulate, so I'm reducing my short position while the market is down significantly today