Trade Aptitude

Results of Tuesday’s Best S&P Futures Turning Points: Neither trade triggered.

Today’s Best S&P Futures Turning Points (consider wider stops and less size in fast moving markets): 

Buy 4885.00 stop 4881.50. Short 4882.25 stop 4885.75 if price falls below and retraces back. 

The World Index: (+100/-100) soars from +7 to +50 with most major world markets bullish on rising volatility. 

Catalysts: MFG & Services PMI Flash @ 9:45. Crude Oil Inventories @ 10:30. Earnings surprises (ASML kills it). China commits to stimulus. 

Quick Tip: Overbought?

Price soars way higher, it’s overbought. Price plunges way lower, it’s oversold. There are many indicators and chart patterns for verifying these conditions. 

The rub is these conditions can and do persist. Exiting too soon isn’t all that bad. All you did was make a little less profit. Entering the reversal too soon is trouble. 

The S&P is at all-time highs. 

Yet, we have high interest rates, inflation, national debt, and global debt. 

We have two declared wars and skirmishes (undeclared wars?) almost daily. 

The context doesn’t look rosy. But your 401K probably does. 

There is no magic indicator that will pick the top of an overbought market. The sensible way to manage it is to pay attention. It’s too easy when you’re seeing new equity highs in your accounts to relax and enjoy the ride. 

Since price falls faster than it rises, instead of getting blind-sided start planning your exit. Tune up your risk management. Ask some “What if?” questions and make decisions with a clear head. 

That’s the macro view. Here’s the trading analogy: You’re in a long trade with substantial open profit. Overbought signals are flashing. You’re excited. Is now the time to relax and let price ride until the fast plunge down? Or is it time to plan your exit by asking some “What if?” questions and make decisions? 

You need to be aware and decisive. Bubbles burst and prices fall faster than they rise (historically about 3X as fast). The worst mindset would be complacency. 

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Trade Fearlessly,

Mike Siewruk

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