SPX - Short Term Bear - Swing Trade
SP:SPX
Here's the details of my trade Short on SPX....
Daily Chart:
- Rising Wedge Pattern
- Strong Break of Support Line (Fed Announcement Dec 18th)
- Retest of the Support Line
- Break back down from the Support Line and below 50 day moving average
- Divergence on the RSI
Fundamental Support:
- Buffer Indicator 203.7% (Near all time highs)
- Buffet portfolio at highest cash level since 2008 ($325B)
- Shiller PE at 37.2, near 2022 peak of 38, Dot com bubble of 44
- FED announced fewer rate cuts in 2025
- Core PCE at 2.8% and rising since June 2024, above 2% FED target
- Inverted Yield Curve is no longer inverted as of Sep 2024, the longest (793 days) and deepest inversion in history. All previous sustained inverted yield curves (8 Total since 1960) except 1 were followed by a recession within 6-12 months once the yield curve was no longer inverted.
Economic Data:
- Next significant economic data is ADP employment report Wed Jan 8th and Unemployment Rate Fri Jan 10th
- A lower or higher employment figure than forecast could move the market and is a potential risk to the short position if employment figures are positive
- However, inadvertently, higher employment figures will reduce the likelihood of FED rate cuts, offsetting some of the upside potential
Target:
- Previous ATH at 5674 ~-4.5% from current price
- Stop: A break back above the support line
- Historic market breakdowns (ie Jan 2022, Aug 2024) typically the initial move took 4-9 trading days with potential for up to 10% breakdown before recovery
Risks:
- Return to normal trading volumes post-holiday could result in continued buying
- Trump inauguration could trigger a wave of bullishness
- Big news in any of the Mag 7 stocks
Overall:
The chart patterns and fundamental data not only support a greater chance of a short term move to the downside, but greatly increase the chance of further decline. At this point, the market is in a potential transition and more data and chart movements need to play out before determining if a bear market is underway.
My Position:
30 Call Options in SPXS (3x Bear SPX ETF)
$6 Strike, Current Price $6.20
Expiration Friday Jan 10th.
Average Price is .20 a contract
Investment $600
Target $1.00-$1.50 (8-13:1 Profit Loss Ratio)
Stop .10
Potential Loss $300
Potential Gain $2400-$3900