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US 500 - Potential Shorting Opportunity

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Probably all just hindsight, and, I'm stupid :D

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@dmedin,

Yes hindsight is a wonderful thing.¬†ūüėĀ

You seem like someone who is willing to put the time and effort required to gain a better understanding of trading the markets. Trading is difficult. Consistently making profits year after year is more difficult and making large significant profits year after year is even more challenging. 

There is a lack of trading ideas and potential trades being posted as people are too scared in case they are wrong and others belittle them. Due to this fear there is hardly any trading suggestions being made for the future. This is from the 'so called' people who think they are mostly right and know best (or better than others). Where are the potential trading suggestions or potential trading possibilities from them? Where are the potential trade ideas or trade considerations from them?

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Haha, I will belittle myself constantly so that others don't have to.  :D

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If 20 < 50 SMA and the Parabolic agrees, then it might be time to short S&P 500 soon.

 

sp.thumb.jpg.eb1a38e1f5ae7c38880c98aafa6c625c.jpg

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@dmedin,

It will be interesting to see what happens next week.

The risk on the short trade right now is that this downward move is just a mere breather before the upward long term move resumes. One needs to be aware of that possibility which is just as likely as a larger downward move occurring. All it takes is good news from Trump, US, etc. and the US indices are storming upwards again. 

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I think there's a potential possibility of shorting S&P 500 brewing.  I want to wait to see if the 20 MA does drop beneath the 50 MA.

 

us500.jpg

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@dmedin,

I agree. Part of trading is about anticipation and being aware of certain scenarios that could play out even before they actually happen. There is nothing wrong with this. There will be times when you are right and times when you are wrong. None of us can predict the future price action with 100% accuracy. 

Yes, the potential shorting opportunity exists. The traders who are aggressive and have a higher risk tolerance will open a short far earlier than someone who is not. In fact some of them may already be 'short' and already in profit. Sometimes when using signals and indicators it alerts us after the price has already reacted so most of the profit can be missed.

I am not encouraging others to take a higher risk than what they are comfortable with.  Everyone will have a different risk tolerance. If you look back at why my trade was unsuccessful earlier on then you will see it was timing. I entered too late and therefore left the trade too late. Those who entered as early as possible would have been profitable and left the trade a lot earlier.

Downward moves generally are shorter in timescale than upward moves and can be sharp / quick. So getting in early and getting out early is crucial when 'shorting'. My experience in Commodities has taught me that and I think that is one of the mistakes I made on an earlier 'short' on this trade. I entered too late and exited too late. 

 

 

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Looking eagerly for any sign of a break below this new trend line next week.   :)

sp500.thumb.jpg.bdcef0c88682e3f8569766ab90a2c8b8.jpg

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@dmedin,

The downward correction has already began. The aggressive trend traders would have entered 'Short' once the 20 DMA was breached downwards. The next wave of trend traders would have entered 'Short' once the 50 DMA was breached downwards. The 'daily' is showing the price at the 100 DMA area. If this was breached then you will see more entering 'Short' with the potential direction towards the 200 DMA. 

However, it may not play out that way and those late to the party (and I was when I started this post) could end up watching as those entering early leave with profits and those entering late are left with losses. 

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This is the second potential shorting opportunity for not just the S&P 500 but for the Dow Jones and Nasdaq 100 since I started this thread.

Many of you will have already initiated short positions and be adding to your shorts as the price corrects upwards.

I have absolutely no idea how far down the prices will go down to for the three US indices but one must stay in the trade and only exit on a trend reversal. One must let their winners run. Timing is key. I found that out when I started this thread. 

The potential is there for the $2341 level to form a double bottom on the S&P 500. However, this could not play out that way and simply continue its resumption of the long term upward trend. So stop losses and trialing stops will be crucial. A profitable exit must be the goal from all three of the trades in relation to US indices for any short trade. 

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Looking very bearish. Gold and Bonds going up. The odds of a 'No Deal' Brexit are increasing. The US is no closer to a satisfactory conclusion with trade talks between them and China. These factors are all acting as the driver for the appreciation of Gold prices.

1841503515_US500_20190603_21_03.png.e452c6b638b26bdc0c824ee3fad621a1.png

The S&P 500 is trading below its 20, 50 and 100 DMA and is a whisker away from trading below its 200 DMA. This is very bearish for me. The other telling indicator when using moving averages is by looking at how they are sloping. A lot of traders merely ignore this vital point in my opinion. Both the 20 and 50 DMA's are sloping downwards on the 'daily/ which means if this price action continues then the 100 and 200 DMA should begin to slope downwards too. One must remember that when using and looking at moving averages that they are 'time lagging' indicators that change after the price has already reacted.

When one looks at the 'Parabolic SAR' then one can see that it is indicating bearishness. 

1497970796_US500_20190603_21_06.png.e73e321b2bd8373b5637ebb3ace47069.png

This price action has represented an excellent shorting opportunity to those who have taken it. It is about anticipating. Now some of you will ask how can you anticipate something which has not yet happened. I tend to look at the price of Bonds and Gold to help me get a feel of whether there is a 'Risk On or Risk Off' environment for equities.

'Anticipation' can lead to some fantastic 'Trend Identifications' earlier than one would otherwise. 

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The subsequent price action of the US 500 since my last post has been bullish.

All the technical indicators were inferring a shorting opportunity but the price action went against all the technical indicators. These technical indicators are 'time lagging' indicators that change after the price has already reacted. 

220418344_US500_20190718_20_59.png.d7131139c28f56757b1d5a153704656a.png

Right now the price his above its 20, 50, 100 and 200 DMA's. If you zoom out then they are sloping upwards but as you zoom in the trend is still looking bullish. I know some of you 'Contrarian' traders will be looking to go opposite of what the technical indicators are showing but going against the trend is dangerous. Even though my previous post was suggesting a potential short trade the price action has confirmed that would have been the wrong trade. Now that does not mean it will keep on being wrong. One has to accept making wrong calls. The beauty of making assumptions is that you can let the price action test them and in this case the price action has confirmed my assumption was wrong. This is a very important part of trading. 

Gold and Silver are going up at the moment. If we see a 'Risk Off' scenario then US Equities may see a decline. If we see a 'Risk On' scenario then US Equities could keep rising with Gold and Silver declining. 

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Upwards trends can continue going upwards far longer than one can imagine. I would never suggest going against the trend. However, one must begin to think how far the Dow Jones, S&P 500 and Nasdaq 100 can continue upwards. At some point capital on the long side must run out!

If one can identify weakness in the trend, weakness in the momentum, volume declining for long positions, trend exhaustion, one can begin to anticipate a potential trend reversal at the earliest opportunity. To do this one must follow the price action and look at how it is behaving in the context of the environment in which US markets are moving.  The US Dollar, US interest rates, price of Gold and US Bonds, US Fed Reserve noise coming out, etc. 

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If Amazon, Google and Apple post good Q2 earnings I think S&P 500 is heading towards 3100+ easily.

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@dmedin,

You may be right. I simply do not know and cannot predict the future with any accuracy. What I do know from experience is that the market and especially index's will not always react how one expects them to. If it were that easy then most traders would go long S&P 500 right now. If you look at the 'daily' right now would you?

Also how do you know that Q2 earnings for Amazon, Google and Apple are not already priced in? Remember the stock market is a 'discounting mechanism that looks around six months into the future'.  The US indices are telling us what it sees six months down the road in the future. 

A lot of traders forget this. Now the S&P 500 may well play out like you suggest so let us see if the price action supports your prediction. 

 

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@dmedin,

It all depends on the when you went long, the reasons why you went long and what signal / indicator triggered your long position. So it would only be hasty if you just went long on a feeling or you just had a thought to go long. 

My two top performing funds in the past 12 months or so in my investment fund portfolio have been 'Japanese Smaller Companies' and 'US Smaller Companies'. I therefore have a long position on US small caps so if there was any drop from an investment perspective I would continue to hold and add on any dips. I am using 'Pound Cost Averaging' strategy with lump sum investments only on major corrections and drops. 

What I would do from a trading perspective if any downward move in US indices were sharp and strong is to consider shorting them if they were at the time one of the strongest trending assets.

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This thread is titled US 500 - Potential Shorting Opportunity. It is all about being patient and letting the price action test your assumptions. It seems a potential shorting opportunity has arisen for the S&P 500. 

The price has gone below its 20 DMA on the 'daily'. This is where agressive traders initiate short positions and they do not worry if they are wrong. If they are wrong then their stop loss will exit the trade for them. It has also just gone below its 50 DMA on the 'daily'. This is where the many others decide to open short positions. This in effect begins triggering stop losses for those who are 'long' thus leading to a sharp correction and amplified downward move. Especially if those traders who were long switch to opening short trades.

810471234_US500_20190801_20_59.thumb.png.6b46f136e73dd37e9f8a7fa357c5f377.png

For me it is all about trading the current price action and not worrying about what may happen next week, next month or next year. Trading the opportunity presented which is right in front of you is an art. A lot of people can hide behind technical analysis and provide intelligent sounding reasoning as to what may happen in the future or what may not happen in the future. During all this time of 'mental masturbation', trading opportunities are being missed. 

Trade based on current price action and trend manifestations. It does not worry me if I am wrong. If the S&P 500 changes direction quickly and it is not a potential shorting opportunity then so be it. It is no big deal. Trading the opportunity sounds easy but you will be surprised how many people miss trading the opportunities in front of them. 

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Posted (edited)

 

@TrendFollower

Haha yes too much masturbation is never a good thing. 

It does look like there will be another wave down now.

 

2097200091_sp500.thumb.jpg.b4647918a7cf96ec74cf1f0954afb590.jpg

 

Edited by dmedin

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Posted (edited)

@dmedin,

I can't remember where I read this term 'mental masturbation' but it refers to those people who over analyse, who conduct extremely complex technical analysis, produce even more complex charts that look more busier than the London Underground and give intelligent sounding reasoning on what is likely to happen in the future but during all this time they are not trading the opportunities in front of them.

It seems likely that there will be a move downwards. I will leave¬†the 'waves' for surfers and for the sea!¬†ūüėÄ

Edited by TrendFollower
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Guest Bill Clinton

I, for one, am in favour of it.

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@dmedin,

The reason why I made the comment about waves is because I am not convinced and the hard data and evidence has not been presented to me which explains why prices, assets and markets must adhere to the principles of Elliot Wave Theory. 

For me it is just another method or tool to use to try and forecast / predict future price movements. There is nothing wrong with that and traders using it, though I do wonder how much profit they are making per annum. That is the key metric for me. Profit Maximisation. That is what matters. You can have all the charts, lines, intelligent sounding discussions with lots of technical and complex matters but it does not mean you are outperforming someone in terms of profits per annum that partakes in none of that. 

 

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@dmedin,

Whilst I am on a role, keeping your trading simple can be more effective. Making sure you understand your own trading strategy as more complexities in trading does not guarantee more profits. This is why I use trend following principles. It does not guarantee success and will involve lots of small losses. However it enables me to have the best chance in catching the biggest trends of the year regardless of asset class. It is the biggest trends which are the strongest performing that will generate the greatest profits required in your trading portfolio if you can identify and trade them. 

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Getting in early as possible on a short position is important. Sharp downward moves and corrections tend to be quick and last a lot shorter than upward trends. 

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Absolutely kicking myself for closing my short position on U.S. 500 early.

As the saying goes, 'Let profits run.'

Adjust your stop loss to break even and let the price action do its funky thing.

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6 minutes ago, dmedin said:

Absolutely kicking myself for closing my short position on U.S. 500 early.

@dmedin

Getting in to early, Getting out to early, Getting in to late and Getting out to late. You can't expect to get 100% if you made a good win be happy, tomorrow is another day and forget the rest or it will eat you up then you start making more mistakes.¬†ūüĎŅ

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@dmedin,

It all depends on what your trading style is. The reason why I let my winners run is because I adopt trend following principles. 

Your trading methodology and style will determine your entry and exits. This in turn will determine the amount of profits and losses you make. 

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Guest phil

"US stocks have just had their worst week of the year. The S&P 500’s July gains of 1.31% were wiped out in the first two days of August. The index fell 1.62% to $2932.05 last Friday, signalling that markets are being short-term oversold, according to founder of Northman Trader Sven Henrich, who says that it’s now imperative that bulls recapture 2018’s highs. European equity markets are also headed for the red, while the MSCI Asia-Pacific index is set for its biggest decline since October in reaction to the trade war and Hong Kong disruption. "

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Markets can react like we least expect them too. Also the markets are a future discounting mechanism so where as we look at the current news, the market is reacting to future (around six months they say) expectations. This is a point that a lot of traders forget. 

 

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