As the market becomes more bullish and excitement increases about a resolution of the US-China trade biff, the overbought technical situation into the sell zone of a quarterly sell pivot is a very compelling set up that only comes along once every three to five years.
It is a powerful concept that will unravel many of the mysteries of how trends develop and it will give you a concrete method for building trading strategies based on the actual price discovery process that the market goes through.
After the US Fed made a sharp about-face last week in response to the market volatility at the end of last year, we find ourselves in a situation where the technical picture is still very bearish but there has been a potentially large shift in the fundamental situation.
With US markets bouncing back so hard from the scare in December I have a feeling we are getting fairly close to a sharp sell-off even if we are heading higher over the next few months. A good way to play it is with options because you can control your downside dollars at risk.
Even if the S&P 500 is going to head higher (The most important resistance level is above 2800), we should see some volatility along the way which can give traders ample opportunity to enter trades that can become free carried fairly quickly.
Without a sturdy model of price action, you are flying blind trying to analyse markets. When is a market ‘going up’? When you start trying to answer such questions in a detailed manner you quickly find that the whole idea of ‘up’ and ‘down’ is a relative concept.
Since my last market update, there has been some immense volatility. But if you go and have a look at my last video, you will see that I warned you there could be a huge move if the low from January 2018 couldn’t hold in the S&P 500.
Regardless of the short-term direction into the end of the year, the bigger picture is starting to look more ominous and a quarterly sell pivot confirmation at the end of this month will increase my conviction to attack the market from the short side on any bounce into resistance.
In this week’s update we will go a step further and calculate where we think the probabilities are highest that markets will change direction.
Technical analysis isn’t a crystal ball. It’s more like a wind sock. Giving you a sense of which way the wind is blowing. Helping you to make decisions that have clear targets and stop loss levels. Where am I right? Where am I wrong?