We have three early bearish signals now on 4 Hrs time frame: ROC71, ROC91, and weak Tenkan/Kijun bearish cross.
The Key support level is obvious: 2025. There is 100 WMA, horizontal level (Chikou Span peaks and bottoms) and Senkou B (future Kumo lower line). A close below this level would bring further selling.
You can already try to sell small size now at this Kijun Sen retest with a stop placed at/above recent highs.
Don't forget, the momentum can accelerate only if we see a break of the support level. Until then recent Price action should be considered as consolidation with some bearish bias. Do not yet leverage yourself too much, take only small positions until the firm sell signal.
Comments
Kumowizard
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Still no further bearish signs, what's more, it trades like people believe stocks can never ever drop again. Price action is still bullish on the 4 Hrs time frame, DMI turned bullish again, but ROC/ROCEMA not yet following. We still have to watch how long this momentum can persist.
Key support level is touch higher by now at 2030.
RobTaylorForex
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You make a lot of good points, and thank you very much for taking the time to reply in such detail it is very much appreciated. I know what you mean about end of Nov expiry... Only reason I am looking at those is because I was guessing this lack of volatility would not go on for much longer and there would be some trigger (up or down) to get some good price action again for some short term gain with a decent move in either direction which I felt was likely. I do feel that end of December puts are the best option, but, for the same price you can also get puts closer to the money for Nov end, and more of them if something happens sooner. Yes the decay factor is huge and I agree with you there so if nothing happens by weekend I'll sell on Friday and re-up on December. It feels like volatility will start to increase again based on the past few days, like the first few drops before a rain storm. I agree, Japan is fckd and ECB is a joke, but so is the US right now, it's just a matter of time before the proverbial shit hits the fan... How long "they" can keep the S&P rallying before the inevitable is the real question... I think if it doesn't happen by year end, it probably wont until end of 2016... It seems like lambs are being drawn in for the slaughter as there are NO doomsayers anymore on mainstream media and to me that is a sign... It seems like big money has been unloading gradually for a while now, and when they are ready (which I thought would be by now) I thnk it'll only take a week to see 1500-1600levels. They just need a black swan... Tell me if you think im fcked lol maybe i need a wakeup call?
RobTaylorForex
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RSI, MACD, and STOCH Divergence has been insane but consistent up until about this past week and now divergence has really accelerated. Yesterday it looked like a nice head and shoulders formed but it didn't break through which could be construed as bullish.... Still, price can't seem to break higher and the trend is the softest its been... Also, first dip below 50day sma on 4h chart for the entire length of unptrend. Also 1st time it has really broken below the 25... The technicals are a good setup for a crash to happen soon but the uptrend has been a beast and could still have some fight... Personally I have some cheap calls/puts expiring end of Nov that aren't far away from price that i recently bought, then some further out of the money end of december puts. Prices are very cheap for end of Nov options, for me, incredible discount i think given the possibility... And if nothing happens by end of week ill probably sell the Nov ones and reevaluate december... Thx for sharing your ideas
Kumowizard
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Few things to add:
Price of options depend on a lot of things and is always relative. You may think that due to a certain delta and volatility the Nov options are cheap, but don't forget about Vega risk. If you have a Long option exposure, time value can exponentially kill your position as you get closer to the option maturity. If you make a bet through November Puts, Price really has to start falling quickly and vol needs to pick up to make money on them. I prefer Dec maturity OTM Puts and Put Spreads to add to bearish positions.
I also hold the Long Dec VIX vs Short Jan VIX spread.
In a sudden crash I still don't believe. The insanity of Central Banks is about to hit the roof. I don't know if they really believe QE was/is/can be a solution to the "problems" they are "worried" about. I think they are making a huge mistake with money printing. Look at Japan's latest GDP! They are fckd, that country is in default. They have an always and forever increasing (actually blowing up) debt, no chance to ballance the budget at all as they will need more fiscal stimulus instead of hiking VAT further, and they are in a tripple dip recession now. Still their answer is print more! They try to use the same seed on a lot different soil. What "worked" for US (this is a question itself how much of recovery is due to the insane series of QE) will not work there.
Also the ECB is doing a huge mistake. They should not force this QE at all as the European real economy is a lot more different structure from US. Nevertheless this fear of deflation is a huge BS! Basicaly the models measuring the inflation (CPI) are outdated and not proper at all. I can tell you there is a lot higher inflation than the official numbers used. So the main point where they fck it up is that they are fighting against a non existing problem with a stupid tool. They should rather anchor inflation expectations up through communication. But you know why they are doing this: the show must go on somehow, as they realised whole Europe and it's banking system is insolvent, there is too much debt and too much leverage in the fiat ccy system. Their last chance is to get an even higher real inflation, and rob out the savers via negative real rates and pushing them into more and more risky investments.
Key support level is touch higher by now at 2030.