S&P 500: Hedging against bear market risk
Updated
The "S&P 500" started on Wednesday to fill the open gap between March 8 and March 9 (above 2740, below 2751). This is bullish and should lead to a bounce in the next days, thereby taking the "S&P 500" higher again. But in case this bounce fails to keep the market going upwards above 2800, the idea is to hedge against further downside risk with a short placed above the high of March 14, at least while the long from 2651 remains open (see related chart idea below).
Short entry: 2785
Stop loss: 2833
Target: 2640
Risk/Reward: 3
The Directional Movement Index (DMI) indicator shows that the downtrend was almost over after March 12, but then instead resumed on March 13 on the "S&P 500".
The Directional Movement Index (DMI) indicator didn't cross bullish on the "Dow Jones", a signal which is even more bearish than on the "S&P 500".
Short entry: 2785
Stop loss: 2833
Target: 2640
Risk/Reward: 3
The Directional Movement Index (DMI) indicator shows that the downtrend was almost over after March 12, but then instead resumed on March 13 on the "S&P 500".
The Directional Movement Index (DMI) indicator didn't cross bullish on the "Dow Jones", a signal which is even more bearish than on the "S&P 500".
Trade active
I went short at 2760 today, with a stop loss at 2778. Because the short might not get filled at 2785 and then I didn't hedge my long from 2651.Note
The S&P 500 closed on Thursday at 2747.33, which means the short hedge from 2760 remains in profit.The open gap was finally almost fully closed. The low on Thursday was 2741.47 and the remaining open gap is above 2740.45
Meanwhile the odds increased that the S&P 500 moves higher, because the Dow Jones reached the lower end of these "not so random" lines on a chart:
Which everyone is watching...
Note
I lowered the stop loss for the short to 2760 to get out at break-even in case the market turns higher again. S&P 500 futures have been holding really well, despite the bad news flow since yesterday.Trade closed: stop reached
Short hedge from 2760 got stopped out at 2760 today.This means I'm going to add to my long from 2651.
Note
Very strange market today.The idea of placing today after the spot open the stop loss for the short at 2760 had been that if the market goes towards 2760 that for sure those recent highs around 2762-2763 get and the stops placed there get taken out, because everyone is going to place his stop loss above those last highs. Instead those highs remained intact intra-day so far.
I'm fine with this outcome, because I didn't wanted to hold the short over the weekend in case there is a strong gap up on Monday. But this price action remains really odd.
Trade closed: target reached
I had no short position open after I got stopped the previous Friday and then didn't found another good area to short from, but maybe someone who followed this idea had a short.On Friday, March 23, 2018 the S&P 500 fell down to a low of 2639.97. My short target on March 14 was 2640, which was thereby reached.
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