Long

S&P 500: Chance of a Hyper Bull Market

Updated

Quote: Investors just pumped the most money ever into stock funds for a single week; U.S. stock-focused funds took in $38.3 billion in fresh cash over the past week, a new record, according to "Bank of America Merrill Lynch".

Source: CNBC cnbc.com/2018/03/16/investors-just-pumped-the-most-money-ever-into-stock-funds-for-a-single-week.html

Quote: Widely-followed JP Morgan analyst says new market highs are coming soon. J.P. Morgan's Marko Kolanovic says the bearish narratives of inflation and trade wars will be proven wrong. "The flow aspect of the sell-off had a striking similarity with the August 2015 sell-off: realized volatility caused derisking from volatility targeting strategies and forced covering of short volatility positions," he wrote. "Unless there is a recession, all of these flows tend to reverse within 1-2 months." He is regarded as an expert in volatility and derivatives.

Source: CNBC cnbc.com/2018/03/15/widely-followed-jpmorgan-analyst-kolanovic-says-new-market-highs-are-coming-soon.html

Long condition: The "S&P 500" closes Friday above 2751. Entry on Monday.

Entry: 2755
Stop loss: 2729
Target: 3012

Risk/Reward: 10

Note

Friday was a very difficult market due to the very narrow choppy sideways trading range.

The core long position from 2651 got barely stopped out at 2751 today (Friday's low was 2749.97), meaning the market could have started to breakdown and drop far lower, but didn't.

The short hedge for the core long from 2760 got also barely stopped out at 2760 today (Friday's high was 2761.85), meaning the market could have started to breakout and rally upwards, but didn't.

Therefore I don't have any open position anymore.

At least the market closed above 2751 on Friday (at 2752.01). I won't blindly go long on Monday though. I want to at least see how futures are trading before the open, maybe I wait even more until the first hours of the Monday session are over.

It's still possible that the remaining open gap gets filled on Monday. Meaning a lower low than this week is possible next week, without removing the chance for higher prices during the rest of next week. If the rest of the open gap gets only filled and the market quickly moves back up thereafter.

I'm going to accept everything above 2725-2735 with a bullish bias on Monday for a long entry. Because that drop might only be a fake-out lower completing some higher order triangle / pennant line structure. Hopefully the market simply gaps up Monday though, that would remove most of all this guesswork.

Trade active

The S&P 500 dropped on Monday as I had expected as worst case in my previous comment. Intra-day low so far is above 2730. The last gap is now finally filled. And there is as of today a new open gap which can get filled later in the week, meaning there is a minor bullish bias.

Long entry at 2733. First Target: 2773. Stop loss: 2713. Risk/Reward: 2

Trade active

Added a second long position.

Entry: 2714
Stop loss: 2688
Target: 2766

Risk/Reward: 2

Trade closed: stop reached

Stop loss for the long from 2733 was reached. S&P 500 dropped below 2713, because the Nasdaq made a new intra-day low and then the S&P 500 followed lower.

Trade active

Added a new second long at 2705

Entry: 2705
Stop loss: 2683
Target: 2749 (upper range of the open gap)

Risk/Reward: 2

Note

This is the new open gap between 2749 and 2741

Trade closed manually

I closed the long which I opened yesterday at 2714 today at 2722. Because it looks like the market could drop towards 2700 once again. And then I could get a better entry and also decrease the risk of a losing trade.

Note

I have been waiting to add to my long position from 2705, but the market didn't drop below 2710 after Monday again. And now the S&P 500 already trades above 2724. I'm now going to wait until a drop below 2720 occurs to add to the long.

The daily lows this week were so far:

Monday 2694.59
Tuesday 2710.05
Tuesday 2712.39 (session not closed yet)

Note

Wednesday 2712.39 (session not closed yet)

Trade active

I added a second long at 2710 today during the very strong FOMC event drop.

Entry: 2710
Stop loss: 2691
Target: 2748 (upper range of the open gap)

Risk/Reward: 2

Note

Intra-day the S&P 500 already bounced back up from 2709.79 to above 2720 minutes later, meaning the long from 2710 is currently in profit.

Let's see if 2709-2710 remains the low.

Note

In hindsight I should have named this trading idea:

S&P 500: Last Chance of a Hyper Bull Market

instead of

S&P 500: Chance of a Hyper Bull Market

Because there was a chance that the market barely avoids this move lower of the last days. Including the close of Thursday March 21 there was a chance left that the market does not break down further. But the bears won.

Trade closed: stop reached

Long from 2710 with stop loss 2691 got hit. The S&P 500 fell at the open on Friday below 2781 in the first minutes.

Note

Long from 2705 with stop loss 2683 got hit. The S&P 500 fell at the open on Friday below 2781 in the first minutes.

Note

If the S&P 500 starts to trade again above 2692 to fill the gap, I'm going to open the very last long against this super-overstretched down move.

Trade active

The risk/reward has increased to 4 from this area below the new down gap.

Entry: 2692
Stop loss: 2678
Target: 2748 (upper range of the open gap)

Risk/Reward: 4

Trade closed: stop reached

The bears are really aggressive. The stop loss at 2678 was hit already. The market dropped back down right from where the open gap starts.

Intra-day low so far this Friday was 2661.78.

New plan is to stick with the plan to look for a bottom and a bullish reversal. But I will now wait for more confirmation. I'm going to wait until the S&P 500 breaks back above 2692 and then quickly breaks above 2694 before going long with a tight stop loss again.

Note

Waiting for the near break-out has been the better idea so far. The S&P 500 just failed intra-day at the high of 2689.74 and then plunged again.

Note

The bears are really aggressive. Maybe we get a new intra-day lower before the close (worst case).

Note

New intra-day low on the S&P 500. I'm glad I switched to looking out for the breakout above the last gap wait-and-see mode.

Note

Bloomberg explained 30 minutes before the session closes today that the S&P 500 is showing a "Diamond Top" pattern, which is very bearish ( explanation: thepatternsite.com/diamondt.html ). The S&P 500 then started to plunge in a new leg lower like a stone.

Note

It's Friday and the extreme selling has currently paused.

I'm going long again if the S&P 500 breaks back above 2668. If that happens I'm going to use a stop loss at 2647 and a target at the upper range of the open gap at 2710. That trading idea offers a risk/reward of 2.

Note

New updates are posted from now on here:

S&P 500: Very last chance for bulls to get back in control

ChartArt

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