Kumowizard
Short

Here is your possible hedge for #Brexit in case.

FX:SPX500   S&P 500 index of US listed shares
324 2 9
The motto for today: "it is never too late!"

Weekly:
I zoomed it out to show you the big picture:
- Is Ichimoku bullish? Well, price is above all averages, but: Chikou Span is not in open space, market could not make a relevant higher high since May/2015, Kijun (26 weeks avg) and Senkou B (52 weeks avg) have been flat line since Aug/2015! This marker stopped trending for a while, but from time to time makes very agressive swings around the 1970 longer term equilibrium level.
- If you look at the weekly, you clearly see the index is virtually at all time high. It has not dropped a penny! Still it looks like the extremely wide range has a slightly bearish bias (red channel). I believe we've been experiencing a major top building since Aug/2015.
- Multi year major trendline is very close now ard 1850-1900
- Heikin-Ashi (you can see it better if you zoom in your chart) shows hesitation. haDelta/SMA3 still zig-zag at zero.

- Strategic key levels are: 2072 (Tenkan) / 1975 (flat Kijun 26 weeks avg., and Senkou B line as 52 weeks avg)

Daily:
- Ichimoku is neutral: average lines are flat! Chikou Span is not in open space. This mkt is not bullish until holds below 2120.
- Heikin-Ashi has been bullish for last two days, but watch haDelta! If it can not go higher, and candle can not make a higher high, this will prove to be a bull trap.
- Bullish trendline mark is obvious. Is it also forming a bearish wedge?

- Most importantly, the support zone is 2061 - 2072 !!! --> Kijun, Senkou B, 100wma and trendline!

So, what happens if the polls are wrong, if Central Banks are wrong, and the whole world being long risk is wrong, and we have a Brexit trigger? Immaginge you are a portfolio manager of a large equity fund. Would you be able to stop efficiently your mega long position without ruining the market? I doubt. Now immagine you are a smart portfolio manager, or you run a hedgefund, and you enter short in small now. Will you be able to stop that short in case UK votes "remain"? I think you could without any problem... at least on the SP500             index , which is almost continously tradable, unlike the DAX             or Eurostoxx50, etc. One thing is sure: markets will move sharply on Friday. If the world gets broken by Brexit, European indexes will open with huge gap down, or else with some gap up. I don't recommend to run any position in European indexes. Stay flat there!
But in SP500             I will certanly go into the vote with some minor short position as a hedge on my overall portfolio. It will be more liquid, in case I think I will be even able to add to shorts ard 2040-50 on a break.
But I have another reason: US stocks in general are way too expensive and as you see on the weekly chart this index is trading virtually at its all time high!

imho SP500             short is the best risk/reward hedge.


cuak87
5 months ago
Thank you Kumowizard. Very good analysis. In a nut shell, your conclusion is better to play short rather than long?.
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Kumowizard PRO cuak87
5 months ago
Hi, sry for not answering so far. Of course, the conclusion was that. Selling it as a hedge for an overall portfolio was very good risk reward. If you saw my Monthly chart post today, then you may realise it will be an excellent bearish run soon.
The question in SPX is not IF we have to short it, but when and how much we have to sell? As volatility will stay elevated, I think (actually other very smart professional fund managers who I know think same way) we have to sell rallies and spikes here, not the weaknesses and drops.
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