It was an ugly week in US equity markets with the S&P shedding 5.95%. The magnitude of this move has turned my model’s short term outlook for the S&P negative. As a result I went short the S&P June 2018 contract this week. As pictured above, now that support at 2630 has been breached, the next level to watch is 2532.
Since selling-off in February to a low which was more than 11% below
the all-time high reached in January, the S&P has rallied to within 5%
of the high of 2872. I believe the upward momentum will continue as the market remains biased towards upward moves.
The equity markets continued their volatility this week attributable mainly to US domestic political factors (Jerome Powell testifying before congress and an indication that trade tariffs may be coming out of Washington). Regardless of the impetus for the volatility, the market is clearly becoming more sensitive to external factors and it is a time for close stops to limit risk. I entered the market briefly on Monday with tailwinds of strong upward momentum but was later stopped-out as the move lost it’s strength and turned downward. I am currently Flat in the S&P futures market.