First Trade Target Reached. Short Position Started at 273.25 SPY.

The target short range came into play this morning on the S&P 500.

Trade executed to sell short at the target price of 273.25 (SPY).

See chart below for updated analysis regarding current trade:

Watch blue horizontal bands (key price levels in chart above) as potential inflection point targets.

Could see a move back up toward today's highs during Wednesday (4/8/20) trading.
In any case, it was a great start to a short position. Trading plan still on schedule.

Current position: 1/2 Position SPY $273.25 SHORT
Current Plan: Hold.
Future Plan: Consider full position SHORT SELL at 285-295 SPY if market trades higher.

Short-term rebound is still in play, but could fall apart at any time.

Short-term market view: Bullish
Overall market view: Bearish


You can follow this trading idea in its entirety at:
https://www.tradingview.com/chart/ES1!/6dg3ZUN4-Trading-in-Major-Market-Downturn-and-Weakness/

Short-Term Bullish Sentiment Remains

Continued expectation of a move toward:
2,700 (/ES - E-mini S&P 500 Futures)
or
270 (SPY - S&P 500 Spdr ETF)

I currently have an order to sell short SPY at 273.15 (1/2 position). Will make it a full position if the S&P trades higher.

See SPY chart below for trade entry targets (end of day 3/25/20) :

You can follow this trading idea in its entirety at:
https://www.tradingview.com/chart/ES1!/6dg3ZUN4-Trading-in-Major-Market-Downturn-and-Weakness/

Short-Term Bottom

The S&P 500 closed above a key price range today. I have not been able to accumulate a Long position yet, but I will consider buying dips in the short-term in anticipation of an upward move toward 2700 (/ES).

Price Levels to Watch: (/ES - E-mini S&P 500 Futures)
Resistance:  2650-2700
New Support: 2350-2400

Price Levels to Watch: (SPY - S&P 500 Spdr ETF)
Resistance:  264-269
New Support: 237-242

To confirm short-term bullish sentiment, we will need to see a close above 2400 (/ES) tomorrow, 3/25/20.

Short-Term market view: Bullish
Overall market view: Bearish

Preparing for the Week of March 22, 2020 - Potential Long and Short Buy/Sell Price Levels

While the overall market view is bearish and lower lows are expected, market is setting up for a potential reversal. Although the market is short-term over sold, this does not guarantee a bounce here at the current price of $2,174 (on E-Mini S&P 500 Futures).

Looking for a potential price move back up to $2,650 to 2,700 (on E-Mini S&P 500 Futures) - Will consider short entries there.

If we see continued selling to start the week, I will be watching the $2,000 (on E-Mini S&P 500 Futures). I anticipate it to be a great buying opportunity. That being said, we may not get that low before seeing a short-term bounce.



Summary (Levels to Watch on E-Mini S&P 500 Futures):
Potential Buys:
$2,000

Potential Sells (or sell short)
$2,650-$2,700

If I take any trades, they will likely be near the start or end of any trading day. I will post trades if I take them.


I am practicing "Social Distancing" by staying home and watching the markets.

General Market Overview - Looking at the S&P 500 Chart

Overall Outlook: Bearish

Looking for a temporary reversal to the upside soon. When the upward move does happen, will be looking to fade the move and sell short. WTT expects market to go on to make lower lows.

Price Points To Watch:

SPY (S&P 500 Spyder ETF)
Long Entry Price of interest:
$200

/ES (June 2020 - S&P 500 Futures Contract)
Long Entry Price of interest:
$2,000

Current Position: Flat (none)
Will post any trades if taken

Longer Term Look (a potential market bottom extreme)
If markets do suffer extended loses this year, watch for the $1,400 level on the S&P 500. this will represent an incredible buying opportunity if it presents itself.

-
WTT view as of 3/20/2020

Trading during the 2020 downturn

Many years have passed since my last post. As the Covid-19 pandemic forces the practice of "Social Distancing", I have prioritized some new free time to do market analysis and some trade recommendations... A global recession has begun and a depression threatens. The financial system and global economy must now battle the unprecedented closures of businesses and the resulting reduction to global purchasing power around the world.

Various topics may be presented, but the ensuing discussion will focus on the S&P 500 Index, the most traded index in the world.

S&P Consolidates Just Below All-Time Highs

I know its been a long time since my last post, but I just wanted to make a quick comment regarding the current market action. The ES (H-14 March Contract) is consolidating just below another all-time high (1856.75 made on 2/21/14). ES is trading just below significant resistance and is showing some signs that could indicate a topping pattern (with the tail that formed following last Friday's new high and the inability to trade back up to that high).

Even with the potential for markets to sell down a bit from their current levels, the market remains bullish with no overwhelming evidence to suggest the current bull run is over. For that reason I will continue to hold my current long position. There is good potential that the ES could trade up to at least 1880-1890 from here.

Even though I do remain bullish, it is important to be aware the market is extended overall. I will be looking for some sort of topping pattern to occur in the coming weeks. Though I am long the S&P 500 now, I will consider reversing that position sometime in March.

Even if my posts are infrequent, I will continue to post my swing trades in the right column.

Exited Long Position Though Market Remains Bullish

Exited my long position (ES U-13 at 1689.75) just before the close of Futures trading this afternoon. I'm not bearish here, its just the odds of holding for more gains do not necessarily out-weigh the odds of a pullback. The ES has moved up 30+ points with hardly any selling since the highs last Friday (9/6/13). The 6th was a shakeout day and the fact that the bulls won suggests that even higher highs are likely in store. While we may get those new highs, the ES is hitting some good resistance and could sell down a bit from here. I may choose to re-enter my long position in the coming days depending on price action.

I am watching the 1657-1667 range (price refers to the ES Z-December contract currently trading 6 points lower than the ES U-September contract) now and will likely buy any pullbacks to that price area.

A close below 1657 (ES Z 13 contract) would turn me bearish and suggest a move back down to 1600 would come next. I don't expect that to happen in the near term, so I favor buying the dips at present.

I will be looking for short entries if the ES (Z December contract) trades up to 1730 in the coming week(s).

This is my speculative view looking forward, we'll see how the price action plays out...

Market Getting Frothy

By frothy, I mean that the market is overbought and is approaching price levels that could be very favorable for short positions. The S&P 500 has moved up almost 50 points since I exited my swing long position almost a month ago. There have not been any solid opportunities to enter another swing position since, and as such, I haven't posted any new trades.

Market has been very bullish and remains bullish, but I will be eyeing the 1717-1727 range (ES U13 Sept Contract) for a potential swing short entry. It depends on the price action, but if the ES gets up there before the end of the week, I will likely be entering a short position.

If I do enter any trades, they will appear in the "Trades" section in the right column. I may not be posting as much lately, but I'll still be publishing my swing trades...

S&P 500 Declines Almost 70 points in 3 days. Will the Bloodbath Continue?

As expected, the Fed didn't announce a reduction in QE, but Bernanke did say there was still a possibility the Fed could start tapering its asset purchases later this year. The markets sold-off pretty much any and every asset class in response.

This sell reaction was stronger and more immediate than I expected. If Bernanke and the Fed were trying to gauge what type of psychological effect that the idea of reducing asset purchases would have on the market, I think they just received a rather rude answer.

Whether the selling was directly in response to the possibility of the Fed tapering before the end of the year or if it was just an excuse to push down an overbought market, the reaction was irrational in my opinion. I had actually speculated that we might see an initial response of buying that would follow the Fed announcement, but it never happened. There was no fake-out to the upside, the selling started immediately and hasn't really let up.

While price action is bearish, I do not expect the selling to continue without at least a solid bounce to the upside first. I unfortunately got stuck in a long position that has yet to give me the right opportunity to exit. Because I believe the market will reflect on the last few days of irrational selling with a rational frame of reasoning, I continue to hold my long entry in anticipation of a bounce. Friday's rebound off the lows signals that there should be additional room to move to the upside. I will look to sell 1/2 my position with a move back above 1600 on the ES.

In my last post, I mentioned a potential bottom of any correction in the 1555-1565 range on the ES (U13). That price range is not far away so it is very possible the ES trades down to my key support before we get a decent bounce. I do expect to see buying come in before that happens, we'll have to wait and see.

Bonds
I've spoken about bonds on a few occasions in the past weeks. Each time, I was looking for support to come in and each time support has been broken. Bonds have now traded lower than the most critical support level at 110 on the TLT. This break of support was not only the 3d break of a possible support level in the last month, it was also on very high volume. This is a high odds indicator of capitulation. It will be important to see a daily close back above 110 (TLT) on Monday to gain confidence in the likelihood of a reversal.

Gold
Fear of tapering by the Fed has also sent the price of Gold lower. While the price action in Gold remains bearish,  I will be watching for a capitulation type move somewhere in the 1150-1250 price range on the YG (Q13 Gold Futures Contract). I will strongly consider  buy entries when that happens.

The bottom line is that fear is rampant across most asset classes and when fear grips the minds of market participants, its often the time to take the reverse bet. I'm not suggesting to get bullish for any extended period of time, but I expect positive price action in the near-term.

Levels to watch on the ES (U13 Sept Contract):
Resistance above at: 1596-1597, 1601-1602, 1611-1612, 1618-1619, 1623-1624
Support below at: 1570-1571, 1565-1566, 1557-1558, 1554-1555

Market Bullish Ahead of the FOMC Announcement

The immediate-term price action is quite bullish and I wouldn't be surprised to see the ES approach or even retest the May highs. In the bigger picture however, I see the market in a topping pattern and that keeps the bearish outlook alive. I do expect to see lower lows as we trade into the summer.

As I write this and the ES trades near 1645, I am more or less neutral. I will be watching the market reaction to the FOMC announcement today (2.00 pm EST) and the press conference with Ben Bernanke (2.30 pm EST).

Expectations:
Fed will not taper. $85 billion in asset purchases will continue.

The catalyst that started the selling back on May 22nd, was the comment by Ben Bernanke who said, "If we see continued improvement and we have confidence that that's going to be sustained, then we could in the next few meetings ... take a step down in our pace of purchases." 

Since this taper comment, Japanese stocks traded down as much as 20%, emerging markets were down 10% and the S&P 500 was down 5%. All this because Bernanke suggested the Fed will create less than $85 billion dollars per month at some point. But lets get real, the Fed is not going to do this any time soon. $85 billion per month in asset purchases will continue and here is why:

• Unemployment rate has not reached Fed target of 6.5%
• Inflation levels remain subdued. 
• The Fed balance sheet is excessive, it has been excessive and it will continue to be excessive. Tapering will not change this.
• The price of Treasury Bonds is approaching important support levels. The Fed does not want to see selling in treasuries continue at this point. Bernanke will make sure this does not happen. This alone guarantees (in my opinion) that the Fed will not taper at this time.
• Industrial and tech companies need to see an economic recovery in the developing world in the 2nd half of the year. Tapering is not the answer and without a recovery in the developing economies, a world wide economic slow down could ensue.

So what does that mean for equities? I really don't think it means much. Continuing to add $85 billion of liquidity into the markets is enough to prevent sellers from reeking havoc on the markets, but it isn't enough to to surge the markets to new highs from here. We have already seen equities bid up ahead of the FOMC announcement, so some of the bullish sentiment that comes along with continued easing, is already priced in. If the Fed does happen to reduce asset purchases (or taper), you can expect heavy selling to commence. Like I said earlier, this is a very unlikely scenario at this time. 

The market remains elevated (ES is up 23% since November 16th of last year) and price action over the past month continues to signify a potential topping pattern. It would take a surprise increase in the level of asset purchases by the Fed to sustain this remarkable bull market without seeing a more significant correction first.

We'll see what kind of language we get from Bernanke. There is still room for the market to move a little higher before more sellers come back into the picture.

Levels to watch on the ES (U - September 2013 Contract):

Resistance above at: 1655-1656, 1659-1660, 1664-1665, 1674-1675

Support below at: 1635-1636, 1629-1630, 1607-1608, 1592-1593.

Looking further ahead, I am expecting a bottom in the 1555-1565 range. But we'll listen to what Ben has to say before getting too ahead of ourselves...

Potential Bottoming Action

Market action remains bearish overall, but the ES showed signs that it may be bottoming in the short-term. The ES made another new low yesterday as it broke through the 1600 level on high volume. The sub-1600 price action was short-lived as buyers quickly stepped in and pushed price back in the opposite direction. I am neutral in the immediate-term with a slight bias to the upside. This means I will consider buying dips as we close the week. A move down to 1605-1607 will be an attractive price-point to consider long entries. That could lead to a 25-35 point trade to the upside, at which point I will be looking to sell the market again.

I exited my short position.

Levels to watch on the ES (M June 2013 Contract):
1632-1633, 1642-1643, 1650-1651
1605-1607, 1601-1602, 1595-1596, 1585-1586

The Bearish View Remains

I waited all of last week for the bearish price action to confirm and it finally did on Friday as the ES (M13 June Contract) made a new low at 1626.25, one tick above the key support level mentioned in my last post.

Price action remains bearish this week as we have seen lower lows. I expect further downside and continue to prefer selling rallies.

Will continue to hold my short position.

Levels to Watch on the ES (M June Contract):
Resistance above at: 1633-1634, 1647-1649, 1667-1669
Support below at: Just watching the 1607-1612 price range for now.

Price Action Shows More Signs to Support the Bearish View

The major indexes, the Dow, S&P 500, Nasdaq and Russell 2000, have experienced two failed rallies in the last five trading days. While the market is still technically bullish, I don't know when I have seen price action that produced topping tails as attractive as these.

I added to my short position this morning and I remain confident in the bearish view looking forward.

To maintain the bearish view:
1) Today's high on the ES (M June 2013 contract) of 1672.75 needs to hold.
2)  The ES (M June 2013) should not see a daily close above 1660-1661.

While I am bearish in the immediate-term, I am not expecting a huge correction.
Support levels I am watching on the ES (M June 2013 Contract) are:
1625-1626, 1607-1608.
If sellers push price further down from there, for example through 1605, the ES could sell down into the 1580s pretty quick. Furthest downside target I can anticipate is in the 1555-1565 price range. Too early to talk about that though. I'll wait for sellers to support my bearish view this week.

Market Provides First Real Signs That a Correction May Be Starting

In the immediate term, I am switching my bias to bearish. This means I favor selling the rallies. The downside action has yet to officially confirm, so this outlook could change.

Yesterday's price action saw the ES make another new high which came within 2.25 points of my target resistance of 1688-1691. The rally was quickly rejected and the markets have since traded back down and engulfed the previous 5 days of upward movement. I expect further downside action and continue to hold the 1/2 position swing short. I was not able to add a contract to the position near the highs, so the short-entry remains half of a full position.

Market Continues Run Upward.

Market remains bullish, but is vulnerable. No updates to my swing short position. The trade has signaled a failed entry and I will consider exiting the position on the next pullback, it just depends if/and how the market pulls back. Support below at 1655-1656, 1648-1649, 1638-1642.

The ES met and passed through the 1648 resistance with little effort and hardly a sign of sellers. That means the ES has a high probability to extend the current move up (140+ points so far) since the April 18 lows. Next upside target is 1688-1691 (ES M June contract). If the ES reaches that price target by the end of the month, I will be expecting a significant pullback from there. It is dangerous to bet against such a bullish market, so as always, must be careful on shorts. The path of least resistance continues to be skyward so buying dips remains the trade of choice. I will continue to anticipate a correction as I hold my swing short (1/2 position from 1645 ES) while taking long entries as hedges...

Target Resistance Hit Today, Though Market Remains Bullish

Buying dips continues to be profitable. At the same time, I do like the fact that the ES hit my target upside level and found resistance. I entered a (1/2) short position at 1645 (ES M June Contract) in the late afternoon session. I can add one contract to make it a full position. It depends on price action from here as to if/when I will add a contract.

As I said in my last post, I prefer buying dips but I also like short entries at key resistance and/or at new highs. Selling pressure has yet to confirm, but I like the risk/reward ratio at this price level. We'll have to see how the market trades into tomorrow before we know more.

I'll post any updates to the status of this position

Additional Note:
Bonds have broken down below the support I mentioned in my last post, so this is something to monitor. Watch for the TLT to rebound off the current 116.50 level. If bonds continue to weaken and my current short position is not joined by other sellers, it will be a sign to exit.

Short New Highs and Buy the Dips

The bullish run continues as shorts get squeezed. Until that changes, no reason to be afraid to buy the dips. At the same time new highs make good spots to consider shorts. The S&P 500 cash index is trading at all time highs and although it may continue to go up, it won't go up in a straight line.

The ES (M June Contract) will likely test the 1635-1636 level in the near-term and this will be another new high to consider shorting. The ES Continuous Futures contract is not trading at all time highs, but it is trading at the highest level since September of 2000, more than a decade ago.

I will be looking for shorts once the ES trades above 1635. I could see the ES trading as high as 1647-1648 before the week is over, but will be looking for signs of selling anywhere in that 1635-1648 range. If I am wrong on a short trade, I will exit quickly. I don't mind taking several small losses in an attempt to hit one trade for a big gain. The key is patience and timing on those shorts. For example, shorting a new high following failed attempts to move higher gives you a better opportunity to use a small stop loss without it getting hit than shorting the middle of a price range.

I do think the markets will make a high inflection point and begin a correction before May is over and it could happen at any time. But like I said earlier, market remains bullish and I continue to prefer buying the dips. Eventually buying dips will stop working, but until it does, I'm a buyer at support.

Additional signs that a May correction is very possible:

• Bonds are currently trading at important support levels and are looking poised to rally. Stocks would likely move in the opposite direction in this case. I expect support to hold on the TLT at 119-120 and for a rally to commence off this support. 119-120 will need to hold over the next week for my bond rally theory to hold. 
• This week's sentiment survey shows that bulls are up by 9.8% to 40.2% overall versus 27.4% for bears. This is the first time since the beginning of April that bulls have outnumbered the bears in sentiment. This suggests that the recent short squeeze may be culminating soon.

Levels to watch on the ES (M June 2013 Contract):
Resistance above at: 1636-1637, 1648-1649, 1651-1652
Support below at: 1618-1619, 1611-1612, 1599-1600

New High Rejected on the First of May, Might It Be Time to Go Away?

We got the rally higher that I expected, it just happened a little quicker than I thought. The latest new high on the ES (M June 2013 Contract) came in right at the 1595-1596 resistance I noted in my last post. From there markets sold off and, yes, it happened to be the 1st of May. I am beginning to entertain a more bearish stance from here and prefer selling rallies right now. To maintain this bearish outlook, the 1588-1590 (ES) resistance needs to hold in the short-term. This level also makes a nice price to consider entering a shorts if you're not already short.

I'll be watching the the market reaction following this morning's ECB rate decision (7:45 am EST). If the market reacts positively and closes the day strong, I'll reconsider my preference to sell rallies.

In any case, I'm speculating that the time to sell the markets "May" be upon us. Today's action will be important in establishing a market bias looking forward.

Levels to watch on the ES (M June 2013 Contract):
Resistance above at: 1583-1584, 1588-1592,  1596-1597, 1607-1608
Support below at: 1569-1571, 1562-1563, 1551-1552, 1539-1540

Market Hitting Resistance, But New Highs in the Coming Week(s) a Likely Scenario

To begin the week, watch for continued consolidation/choppy action between 1570 and 1583 on the ES (M June 2013 Contract). Price will need to break-out in one direction or the other and I am favoring the downside in the short-term. I expect price to break down on Monday or Tuesday, so short positions look interesting on any failed rallies above 1580 ES. When selling does take hold, first target to the downside will be 1563-1564. If support does not hold there, 2nd target to the downside is 1546-1547. I expect one of these support levels to hold and for buying to then drive the market up to another new high in May. This should mark a genuine exhaustion point for a very extended market. And as cliche as it sounds, I expect the "Sell in May and Go Away" to play out again this year. We might have to wait a couple of weeks into May for this to happen, but I do expect to see at least a 6% correction from there. Of course we'll have to watch for pattern and price action to support this theory, but for now, that's one of my higher probability scenarios.

Signs that support this viewpoint:

• Bonds setting up for a price move higher (yields lower) in the coming weeks. TLT is looking bullish which will set up for a nice sell in equities. Watch for 120-121 (TLT) to hold as support. A continued move higher from there will support a risk-off mentality and send stocks lower.
• GDP for the first quarter came in at 2.5%. Though this is an improvement over the 4th quarter, it is below consensus estimates of 3.1% and thus is not a bullish indicator in what is an extended market.
• Bearish sentiment remains high as many investors expect a correction. This is often a contrary indicator as the crowd may continue to get squeezed. In the short-term this would support my view that new highs are around the corner. Watch for sentiment to move back into the bullish camp as a potential indicator that it "May" be time to sell the markets in anticipation of a Correction.
• Although the Transportation Index ($TRANS) has seen gains over the past 6 trading days, it remains in a downward trend since early March. $TRANS remains above fair value and could easily correct quite a bit more towards November 2012 prices. If the $TRANS is headed lower, the S&P 500 is likely to head in the same direction.  

In summary, there are plenty of reasons to speculate the potential for a correction in the markets. Just remember that the charts remain bullish and until this changes, expectations of a break of the trend are only speculation. Until then, I remain bullish in the overall picture. Time will reveal the truth.

Levels to watch on the ES (M June 2013 Contract):
Resistance above at: 1583-1584, 1589-1591, 1595-1596, 1607-1608
Support below at: 1569-1570, 1562-1563, 1547-1548