SP500: Has it formed or is it close to forming a floor?The first thing we need to consider is, what has the market discounted? Or rather, what has led fund managers to sell shares of the SP500? From my point of view, what fund managers think is:
1) That the US economy is strong.
2) That the labor market is stabilized.
3) And that wage growth is in line with a CPI of 3%.
Therefore, they estimate that the Fed does not need to cut interest rates. BUT, we already knew this in November, and the SP500 continued to rise steadily.
--> WHAT IS NEW THAT HAS CAUSED THE SP500 TO FALL?
The strong APPRECIATION of the DOLLAR. This has put downward pressure on the stock markets. But what happens? The DOLLAR is reaching a ceiling area, and we could see it retreating somewhat or entering a sideways range in the coming weeks, favoring again the RISES OF THE STOCK MARKETS.
--> At what point is the SP500 technically?
The technical aspect of the SP500 is that it has a clear bullish trend in the medium to long term, but is currently in a correction phase. Today, on the H1 chart, we have seen the FIRST BULLISH WARNING (Bull), and therefore, we could see a bullish move at the end of today’s session and during tomorrow, which could extend if it surpasses the 5,844 area.
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Strategy to follow:
ENTRY: We will open 2 long positions if the H1 candle closes above 5,844.
POSITION 1 (TP1): We close the first position in the 5,980 area (+2.35%)
--> Stop Loss at 5,770 (-1.2%).
POSITION 2 (TP2): We open a Trailing Stop position.
--> Initial dynamic Stop Loss at (-1.2%) (coinciding with 5,770 of position 1).
--> We modify the dynamic Stop Loss to (-1%) when the price reaches TP1 (5,980).
SETUP CLARIFICATIONS
*** How to know which 2 long positions to open? Let’s take an example: If we want to invest 2,000 euros in the stock, we divide that amount by 2, and instead of opening 1 position of 2,000, we will open 2 positions of 1,000 each.
*** What is a Trailing Stop? A Trailing Stop allows a trade to continue gaining value when the market price moves in a favorable direction, but automatically closes the trade if the market price suddenly moves in an unfavorable direction by a predetermined distance. That predetermined distance is the dynamic Stop Loss.
--> Example: IF the dynamic Stop Loss is at -1%, it means that if the price drops by -1%, the position will close. If the price rises, the Stop Loss also rises to maintain that -1% on the increases, thus reducing the risk until the position enters profit. In this way, very solid and stable price trends can be exploited, maximizing profits.
