S&P 500 "Prevailing optimism comes with hidden risk"

5 Ara 2019

Hello Traders!


Today, I wanted to talk about our all time high stock market! Well, it went down from all time high a little bit but I know my trading team shorted at the highest point and made sweet profit from it. Now, as we're forming a huge H&S pattern, I wanted to publish public Idea rather than keeping it for our trading team.



On the right hand side, we have KOSPI, South Korea stock market index chart. Interestingly enough, it seems like they just had a similar H&S pattern and completed. So I think that this could be very useful when it comes to analyzing S&P 500 from fractal perspective.
As we all know, US-China relationship is the biggest thing that we're watching in this market. I, however, don't even care about what they say. It doesn't matter whether they make a progress or not. This is because none of these are my trading criteria. (Well, I would love to see that they keep it peaceful tho).

So, let's just look at the KOSPI chart first.

1) KOSPI formed beautiful left shoulder, head, and right shoulder and broke below its neck-line.

2) Notice yellow colored circle and green colored circle above.

These two circles are one of the most important things in this analysis as it confirms downward trend. The end of left shoulder and the beginning part of right shoulder is getting lowered and peak of right shoulder should not go above the head's peak. This is premise to keep it downward.
Currently, KOSPI, the chart on the right hand side, followed those rules, completed H&S pattern, and still trending downward.

3) On top of that, Stochastic RSI is also giving us a bearish divergence signal in a similar way. I personally don't use divergence very often, but that doesn't mean that we can ignore it. It's pretty useful if you just use it as a reference. What we need to understand from this indicator is that when the stock price goes up and forms Head peak, actual divergence level goes down. Number 1,2,3 is indicating such movement above.


Thus, we can conclude that our S&P is currently

1) in a process of forming right shoulder, and in order to complete its pattern just like KOSPI did,

2) there's a premise that right shoulder's peak should not go above it's Head price level. This means one thing. This area, above Head line, is loss cut line for this short position.

3) Furthermore, if the below indicator confirms lower high, then its reliability surges even more.

However, if you just keep in mind that there's still a lot of room to go up to confirm Stochastic RSI's 3rd high on SPX side, you should be able to catch a better entry point for this position.

Short position target is calculated based on H&S price target area + accumulation support area.


Thank you!


After all, only Traders who have right strategies that penetrate markets will survive, not people trading with luck or without criteria.