S&P 500: Maximum fear priced in. Dodd-Frank repeal rally is next

The "S&P 500" did not close Tuesday at the lows of the day and also closed above the EMA 50 on the daily chart . The "Russell 2000" small-cap company index ended Tuesday unlike the large-cap US stock indexes with a higher close. And US President Trump floats a complete repeal of the Dodd-Frank bank regulation act, which is very bullish for bank stocks. All of these pieces together allow the US stock market to go higher at least for a short-term bounce to test the upper resistance.

Long entry: 2340-2349
Stop loss: 2335
Target: 2365-2380
Risk: 5-14
Reward: 16-40

The ideal entry price for my original bullish idea was reached yesterday:
评论: Here is what happened.

I had published my chart on Wednesday before the spot market opened. The market opened Wednesday above the 50 day simple moving average, but then bears won the trading day and the index closed below this key line in the sand. Then on Thursday the S&P 500 opened bearish below the Wednesday close (and below the 50 day SMA) and proceeded to close very bearish at the lows of the day.

The market was closed on Friday due to Easter and so the S&P 500 went into the weekend with the start of a bearish trend - highlighting a potential total mean reversion of the Trump rally; instead of a minor bounce higher supporting the overall uptrend, which I had anticipated for Thursday.

This strong decline on Thursday surprised me. But as I learned in hindsight using backtests, closing below the 50 day SMA is one of the most reliable moving average based short signals. It is more reliable for going short in the short-term than for example going short when the S&P 500 closed the day below the 20 day or below the 200 day SMA.

Just wondering why you changed to long from your post on April 7th where you targeted to around 2280? Are you still thinking long or back to being short?
@BAB75, I'm now more bearish going into the new week, because the backtests I made over the weekend showed the price could fall more from where it closed Thursday. If we repeat what happened on September 9, 2016 the price might not fall lower much more. But in every other case the market fell a few more days even lower (compared to historical similar situations).

Nobody can predict how much the recent emotional fear of a market crash will calm down over the long Easter weekend. Which might bring back some risk taking bulls into the market who were absent on Wednesday and Thursday. Or if the potential extra research time the long weekend might provide to some investors is going to flip more bulls to join the growing number of bears.

Until proven wrong by the market I now prefer following my bearish scenario:

@BAB75, I had changed my idea from short to long, because the market usually loves to get everyone in the wrong direction only to do the opposite at the end. This happens a lot in strong bull market rallies where the bulls love to force the price higher to squeeze shorts the exact moment the bears see all their bearish sell signals confirmed and see the end of the world coming. And this was increasingly looking to be the case again with many sources I follow which are more often right than wrong also leaning bullish for the week to close at least neutral and not as bearish as it actually was.

This is how I went into publishing this chart recommending a long, also because I had some very early buy signals on my own, which worked during the rally in the recent past and most of these had just started to flash new buy signals starting on late Tuesday, early Wednesday. In the end everything I used to get an idea for the short-term was wrong. Maybe also because of the unpredictable very negative political news which had dominated those days.
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