S&P 500: Potential peak reached
Updated
The Fisher Transform signals a trend change as the slope has turned bearish and the price of the "S&P 500" yesterday closed below the Hull moving average , which is also bearish .
While I was starting to lean bullish due to recent new highs on many tech stocks thinking that the "S&P 500" had only a consolidation through time and not through price - the market might now finally start to move with the cycle again and therefore begin to decline as futures already fell lower ahead of the cash open and the "VIX" had recently a strong move higher on the FED decision day this week.
Short entry: 2780-2795
Target: open intraday gaps way below 2700, around 2692
Stop loss: 2809
Risk/Reward from 2780 down to 2700: 2.76
While I was starting to lean bullish due to recent new highs on many tech stocks thinking that the "S&P 500" had only a consolidation through time and not through price - the market might now finally start to move with the cycle again and therefore begin to decline as futures already fell lower ahead of the cash open and the "VIX" had recently a strong move higher on the FED decision day this week.
Short entry: 2780-2795
Target: open intraday gaps way below 2700, around 2692
Stop loss: 2809
Risk/Reward from 2780 down to 2700: 2.76
Note
The reason why I wrote short entry at 2780-2795 is that the actual move lower has already been almost fully priced in. Because the actual peak happened on June 12 or June 13. I was waiting for more evidence to see it get confirmed as the market was very close to a breakout higher.The S&P 500 could fall lower next Monday (that would a strong downtrend), but there could also be a bounce on Monday which then could later get sold again, which is less risky than shorting below 2770.
As I just explained: Short-term the "buy the dip" crowd might lift the market up again. And they could move the market in the same swing above 2800. Only if the market again fails to break higher can a short be placed with less risk of a short squeeze.
My scenario explained with a chart. The time spans can be very different or I could be totally wrong about this:
Trade active
Short opened at 2779.5 today.If Monday gaps up above 2780 I'm going to add a second short position next week.
Note
Friday's short from 2779.5 is in profit this Monday after the S&P 500 declined to a low of 2757.12 so far today.The "buy the dip" trend remains so far active though with the market trying to bounce higher again, therefore if the market goes today back above 2769.5 I'm going to close the short in profit. Otherwise the plan is to keep the short open and wait for further declines.
Trade closed: target reached
Short closed in profit at 2769.5The S&P 500 already moved higher above 2771 since then. The open gap is located around 2776.
Trade active
Opened a new short at 2771 after the S&P 500 failed to move higher towards 2775 (intra-day high so far was 2773.92).Trade closed manually
The "buy the dip" crowd is back once again. The S&P 500 didn't decline further than 2766.87 in the second down move today.Closed my short with a minor loss at 2772.
Note
Ouch :/While I had expected that more declines would be possible later on Tuesday. My idea was that there would be at least one minor bounce higher and maybe even a gap up on Tuesday's open. Which would have been the perfect moment to open a fresh short from a higher position than 2771-2773. This may still happen, but the odds are way much lower after the very bearish price action the S&P 500 had before the open.
I had also researched in advance on Monday that Trump could increase his trade war from $50 Billion to $100 Billion, but my thinking was the next wave of tariff announcements would start later this week.
Instead I was dead wrong on that. Trump quadrupled his trade war size against China to $200 Billion after the US stock markets had already closed Monday. Which then strongly hammered the S&P 500 futures market lower overnight before Tuesday open, while I was sleeping.
Now the market is nearing short-term panic levels, which means the best (lowest risk) price area to short from is not available anymore.
Trade active
I went short at 2774 today, after the S&P 500 failed to move above 2775 so far this Wednesday. There are currently 2.5 hours left until the close.This is a hedge against downside risk. I don't think it will work out, but I don't know what tariff news is going to come out after the market closed.
Note
I had expected yesterday at the close that today on Friday the S&P 500 might bounce higher. This happened so far with the open far above yesterday's close ( close yesterday 2749.76 vs open today 2760.79). But I also think that the price won't go back above my short entry at 2774 and here is why:The low yesterday was 2744.39, but S&P 500 futures had made a lower low on June 19 at 2735.75, which means there is a higher probability that the S&P 500 could decline towards 2733-2736 (2740). Therefore I keep my short from 2774 open despite today's market advance, which could extend into next Monday. Before the S&P 500 could resume this trend downwards.
If you don't want to risk giving up all your profits from the short I recommend to close the short this Friday. I'm only going to close my short if it reaches break even.
Note
I expect a bounce higher today on June 26 (lasting maybe until the end of June up to July 6), but I don't expect this bounce to move the S&P 500 back above 2774. Therefore I keep the short open.P.S. I wrote a longer update in the comment section below.
Note
The pain level for this short is increasing. The S&P 500 has been moving higher since I recommended to go long on July 3. 
Earlier the S&P 500 had dropped since I recommended to short at 2774 (the high that day was at 2774.86) on June 20 down to a low at 2691.99 on June 28.
I was pondering to recommend to close the short on July 3 and then again there was a good chance to close the short on July 5, but that was before the reaction to the start of the trade war was actually known. There remained a risk that the market strongly drops on Friday with the start of the trade war, which is why I decided to wait one more day to comment here.
I think that hoping that the S&P 500 is going to drop soon again is now starting to become a gamble, which is why I recommend to close the short until the close of Friday if you want to take profit. It could be that next week the markets drops like a stone, but this is not the current short-term trend.
I keep my short open, because this short is used as a hedge to protect my core long position I opened at 2580 on April 3.
I'm only going to close this short hedge from 2774 right before it would start to lose money once the S&P 500 moves back above 2768-2772.
Trade closed manually
Wow, these bulls are brutal!My scenario was that the S&P 500 would gap up at the open and then decline for the rest of Monday (over in Europe the DAX already did this). But I also thought that the S&P 500 would stay below 2770 with that gap up. Instead the S&P 500 opened at 2768.51 and S&P 500 futures had already traded above 2774 before the open, which is why I closed my short hedge position at 2770 at today's open with at least a micro gain.
Note
It looks like the bears are fading the open while bulls are taking profit.There is a chance for a high risk short here around 2776.
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