Monday, March 15, 2010

Strategy for a Downside Move in the S&P 500

Here is my near term plan, given to you ahead of time, for a potential downside move in the S&P 500.  I am simply looking for the "easy" 16 points for now.

The low's of last Wednesday and Thursday were roughly S&P 1140.  Aside from the gap "way down there" at S&P 1078, we have yet another one created between March 4th and March 5th

High of March 4th 1123.73
Low of March 5th 1125.12

Hence, the obvious target is 1124

If this happened soon it would take us to the exponential 20 day moving average as well, which would be a convenient coincidence.

So if the S&P 500 breaks 1140 I plan to be aggressive with index positions (short TNA ETF in the simulator but long TZA in the real world, SPY puts) and try to make my hay for this 4 week period.  Thus far 2 weeks in, we are roughly flat with our index (Russell 1000).  If I can catch these 16 points (assuming it happens) we can go back to a quiet state of affairs after any swoosh down.  *note: If after breaking 1140 to the downside, we jump back over 1140 I'd be stopping out of those index short positions to control risk.


I don't want to think too far ahead but below S&P 1124 we have 1112 (the 50 day moving average) - I assume I'll be a buyer of stocks if we see any move in that area, assuming that the market would try to bounce - but then stop out and go back to the dark side if 1112 breaks.  Because then I'd be targeting that gap at 1078.

Of course this is all presumptuous because today's "swoon" might be over in minutes ;)  Just laying out my intermediate strategies.  Currently we are at 1142.  On the upside, we are still waiting for that push over S&P 1153 as outlined the past week or two.


Please note the non confirmation of the 2nd most important market in the world, even as US listed stocks of the Chinese variety exist in a vacuum of glee...

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