Short idea on SPX (S&P500 index)
This is looking more and more like a bull trap the more i look at it...
We've seen a strong push to the upside around 20% or so from the lows and now everyone thinks its "bull season" I'm sure most of you is aware of the dead cat bounce theory, and for those of you who don't it is basically the thought that if you drop a cat off the roof it will bounce a bit higher after hitting the floor before falling again maybe even lower in the case of the market, and this is very similar to the market that we are seeing.
With that being said we know that the market has been falling since the 20th of Feb and we have currently seen quite a positive move to the upside (20% or so from the lows) which is tricking the "silly money" into believing that this is the bottom and we are on our back to all time highs again, a classic bull trap!
People seem to forget that fears of corona virus are not subsiding, if anything this corona virus is just getting started, the US has officially become the most infected Country in the world with the most amount of confirmed cases in the world! This isn't a positive for the US I can promise you that and It isn't going to have a positive affect on the dollar, the S&P 500 or any of there stocks.
The spread of Covid 19 (being politically correct and all) is spreading faster and faster as the days go by with no real stop in sight, we are seeing deaths rise at an exponential rate as well as the number of people being affected climbing daily. I don't know about you but in my mind this doesn't paint a very positive picture for the dollar index, or the economy at large, but more specifically the American economy.
With that being said i don't think that this is the end of the "crash" i see a lot of downside still to come and this is why:
1. As i stated above USA has the most confirmed cases in the world which can't be a good thing for them from an investment point of view.
2. The US Dollar index has recently seen a change in direction over the past weak or so indicating a change in direction to the downside, which is a good indication that we might see the US dollar index weaken in the coming week or so. FYI: The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. So in other words it is a direct representation of the strength f the dollar relative to other currencies.
3. The market formed a gap on its short burst up in price at around 2291 - 2340 and it is a well known phenomenon that when the market forms a gap in price that the market will make it's way back to close the gap. So with this being said i am quite confident that the market could make a move lower back to the lows in order to close this gap.
4. There is also a Fibonacci level or two in play here, we have the 50% retracement level around 2664 and the well known 61.8% retracement level a little higher at around 2774 (which is less likely to see price retest this level but still very possible).
In conclusion I can see price perhaps pushing a little higher in the early days of this week, before falling further to at least the lows that were formed or even as low as 1939.
Upon seeing a push lower i will look for bearish confirmation/bearish corrective structure before entering into a short position.
Please note this is not trading advice and i am not pushing for a sell or buy but this can be seen as merely a market idea.
We've seen a strong push to the upside around 20% or so from the lows and now everyone thinks its "bull season" I'm sure most of you is aware of the dead cat bounce theory, and for those of you who don't it is basically the thought that if you drop a cat off the roof it will bounce a bit higher after hitting the floor before falling again maybe even lower in the case of the market, and this is very similar to the market that we are seeing.
With that being said we know that the market has been falling since the 20th of Feb and we have currently seen quite a positive move to the upside (20% or so from the lows) which is tricking the "silly money" into believing that this is the bottom and we are on our back to all time highs again, a classic bull trap!
People seem to forget that fears of corona virus are not subsiding, if anything this corona virus is just getting started, the US has officially become the most infected Country in the world with the most amount of confirmed cases in the world! This isn't a positive for the US I can promise you that and It isn't going to have a positive affect on the dollar, the S&P 500 or any of there stocks.
The spread of Covid 19 (being politically correct and all) is spreading faster and faster as the days go by with no real stop in sight, we are seeing deaths rise at an exponential rate as well as the number of people being affected climbing daily. I don't know about you but in my mind this doesn't paint a very positive picture for the dollar index, or the economy at large, but more specifically the American economy.
With that being said i don't think that this is the end of the "crash" i see a lot of downside still to come and this is why:
1. As i stated above USA has the most confirmed cases in the world which can't be a good thing for them from an investment point of view.
2. The US Dollar index has recently seen a change in direction over the past weak or so indicating a change in direction to the downside, which is a good indication that we might see the US dollar index weaken in the coming week or so. FYI: The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. So in other words it is a direct representation of the strength f the dollar relative to other currencies.
3. The market formed a gap on its short burst up in price at around 2291 - 2340 and it is a well known phenomenon that when the market forms a gap in price that the market will make it's way back to close the gap. So with this being said i am quite confident that the market could make a move lower back to the lows in order to close this gap.
4. There is also a Fibonacci level or two in play here, we have the 50% retracement level around 2664 and the well known 61.8% retracement level a little higher at around 2774 (which is less likely to see price retest this level but still very possible).
In conclusion I can see price perhaps pushing a little higher in the early days of this week, before falling further to at least the lows that were formed or even as low as 1939.
Upon seeing a push lower i will look for bearish confirmation/bearish corrective structure before entering into a short position.
Please note this is not trading advice and i am not pushing for a sell or buy but this can be seen as merely a market idea.
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