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US 500 - Potential Shorting Opportunity

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I think we now have the potential and it is potential shorting opportunity on Dow Jones (Wall Street), S&P 500 (US 500) and Nasdaq (US Tech 100) as well as other indices. The FTSE 100 is not looking too good in advance of Brexit.

The 'daily' chart is looking rather bearish. The price action is looking bearish. However the price has not breached any of the key moving average indicators as of yet for the US 500. Hence why I am using the word potential in terms of trading opportunity.


Some of the ultra aggressive traders will already be short the S&P 500 and other similar indices but if they are wrong the price does not continue downwards then they will be out quickly. 

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Wow. Just look at the volatility. The price action is erratic to say the least. This has happened before on quite a few occasions in the past. 

In one hour from my initial post to this post the price action has reversed. It is all about waiting for a clear signal for which direction these indices are going to go in. 

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It looks like the clear signal was up, up and away!

I mean the chart speaks volumes.

The question now is whether there is a potential shorting opportunity? The Relative Strength Index (RSI) is showing overbought levels on the 'daily' as the chart below highlights. 


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As you can see from my post on Friday (above) I was beginning to 'smell' the possibility of a drop and what a surprise it happens albeit on the backdrop of the usual 'US-China' news. 


Well done to those who initiated a 'short' trade when the RSI went above 70 and at overbought levels. History (above) shows that every time the RSI on the US 500 has gone above 70 and in the 'red zone' then there has been a sharp drop afterwards and the US 500 has not disappointed us this time.

This is a good example of historical patterns repeating themselves. I accept there was no guarantee of the short trade succeeding but based on the 'balance of probability' it was likely to happen. The odds were in favour of a sharp drop and the US have decided to release a narrative to justify the reason for the sell off. I personally think the sell off would have happened just based on these indicators and signals (technicals) regardless of the news flowing out in relation to the US-China trade. That is just my personal opinion and I could be wrong. 

Edited by TrendFollower

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It seems to me that the trend is weakening. It seems exhausted but positive and bullish news could resurrect this very quickly.


Right now it seems like it wants to head down but we have seen this before and it carries on going up.

If you look at the 'Detrended Price Oscillator' it seems that we are seeing overbought levels which is one of many indicators that can be used to gauge future directional movement as shown in the chart below. I must stress this indicator alone should not be used but it should be used with others to help complement any decision making process. 


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