Moves across the equity markets these past few days are of historic proportions. I have been a broker for 17 years and even during Sept. 11, 2001 I did not see that type of volatility in stock indices.
Enough has been said about this part. What's on the mind of most investors is ,"what's next?" Hence, we call it the futures markets...
A few things those are almost certain:
Expect high volatility to stay around for a while.
Regardless of the final direction, you will see "zigzags," both up and down.
"The unexpected" will often happen.
Here is what I see as far as near term direction:
This has been one of the strongest bull moves in history. In order for this uptrend on the SP500 to be severely damaged based on the MONTHLY chart, we need to see a break, preferably a close below 1813.
If we break this level, my prediction is that we will visit 1746 and 1640 within weeks...perhaps quicker.
In between, we have 1831 that stands out on the futures contracts, as this is where the price limit halts took us this Monday. There is also a Fibonacci level right at 1829. I would not be opposed to trying to play the long side around these levels and using a put option or a stop below 1813.
Here's a Heikin -Ashi monthly chart of the mini S&P 500 for your review:
My opinion is to try and sell rallies, or if you are an options trader, perhaps look to sell calls and use the premium to buy puts. If you are not familiar with the risks associated with futures trading and/or options on futures, I recommend you visit our broker assist services and get help creating a trading plan.
An extra word of advice for all you day-traders out there:
Volatility is skyrocketing. This is a completely different environment for trading than you were in 3-4 weeks ago. Markets are evolving and you must adapt your trading to changing market conditions.
This is where you find out if the gambler in you is stronger than the trader in you - or vise versa. If the trader is the strong one, you will REDUCE trading size, become extra picky in your entries, perhaps even decide not to trade at certain times. If the gambler is the dominant one...you will find yourself all over the place: up huge, down huge, and I am sorry to say, but sooner or later you will blow up...
Think about it, and try to help the trader within win over the gambler that resides in the same neighborhood.....
Don't be GREEDY...set a daily profit target and daily loss limit and stick to it. That can be the difference between you surviving to trade another day...or an early trading grave.
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