S&P 500 IndexShort
SPX - Short Term Bear - Swing Trade
Updated
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
Trade active
SPX also has a Head & Shoulders pattern formed on the daily chart....
Left Shoulder - Nov 11th
Head - Dec 6th (6100)
Right Shoulder - Dec 26th
Neckline - 5875
The Head and Shoulders Pattern is a 35 day formation
Typical move is 1/3 the # of Days = ~12 Days to Target
Distance between Head and Neckline = 225
Target = 5650
The H&S pattern adds addtional confirmation to the trade
Note
A break of the neckline today 02/01/2025 EST at 5876. The S&P rose early in the day but back down after touching the 1hr chart 50MA.
Both the 4hr and daily chart are still showing "Short" on QQE Signals and particularly the 4hr QQE signal is what I'll be watching for a switch to Long to determine a bottom/change in direction. Along with the RSI.
Key news today...
Tesla stock dropped as much as 8% on Thursday after the company reported fourth-quarter vehicle deliveries. The company delivered 495,000 vehicles in the quarter, missing analyst estimates of about 505,000. For the full year, Tesla delivered 1.79 million vehicles, representing the first annual sales decline for the company. Tesla delivered 1.81 million vehicles in 2023.
Although the miss isn't large, it's not a beat. This highlights the competitive landscape in the EV market, which is another topic, but what it showcases is Tesla is already making plans to lower prices.
TSLA is also expected to launch its lower-priced EV in early 2025 to spur growth for vehicle deliveries
This is good news to help spur growth, but it's not great news when competition is fierce and the company has to lower prices. In some respects the lower prices will be offset by the removal of the EV credit in the USA. This will continue to put pressure on Tesla's stock until the more aspirational self driving cars and robotics either kick into gear or important news comes out.
In addition...APPL News...
November sell-through for iPhones dropped more than 8% year on year to lower forecasts for iPhone sales in the December quarter. The decline was driven by weakness in the Chinese market, where iPhone units fell 28% versus a year ago. Lowering UBS estimates....iPhone unit estimates were lowered to 77 million from 82 million and revenue to $67.2 billion from $69.7 billion
This stock is down 3% on the day to $242. Apple is offering a promotion Jan 4-7 in China with reduced prices to drive demand. See my Idea for APPL, this again, price reductions, although may drive some demand, is definitely not good news for the business and highlights the strong competition in the smartphone market.
Current position:
Maintaining my current position in SPXS. Looking for a possible retest of 5876 and continuation down.
Trade closed: stop reached
Unfortunately I got stopped out on this trade. It's my fault. I missed a wave up that I should have known from history. I will post all the details in my next idea with a video and explanation.
The good news...the pattern is still very much intact and I explain in detail via the video what I'm seeing and what the next trade opportunity is...
30 SPXS Call Options
Stopped out @ .09
Loss -$300
Total Portfolio Balance $3400
Portfolio since $2,000 deposit Dec 18th: +$1,400
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