Commodity Chart Of The Day
(click image to enlarge)
A one-way trade for much of the summer, the stock market has climbed against all odds for the last four months. Is the parade finally over, as prices in the recent sessions have started to trade lower? I need confirmation, and we are starting to get it with a penetration of the 9 and 20 day MAs this week. Let's see if the up sloping trend line drawn on the chart above can hold …roughly at 1425 in December futures. I say no, and am suggesting clients use the Fibonacci level as targets on downside trades.
After a 16% advance this summer, I don't think it is unrealistic to see a correction. Those that are not willing to take a bearish stance are at a minimum advised to lighten up in their stock portfolios. A novel concept would be to gain bearish exposure even as a hedge. My target is 1350 in the coming weeks, which would represent just better than a 5% correction. I like the December 1400 ES put for option traders. As for futures traders, I think you can scale into shorts while trailing stops staggered above the 9 and 20 day MAs.
Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.