What is the outlook for S&P500 once we get the US Presidential Election results? This is the question that most traders of US stocks and options have in their mind. Let me start with the assertion that we are still in a bear trend in the big picture. Bear market rallies are common, and often take us up by 25% or more. But inevitably, the trend will reassert itself, and we will be back on our way down. So use this rally to get out of those stocks which you might have bought too soon, and wait for better levels to buy them back. As for sell-levels, well, I think 1045 should be a decent level to get out, but if we get to 1136 levels, I might even think of turning short on some weak stocks! To sum up, don’t overstay this rally in the SNP500 beyond 1136. Actually you should watch what happens at 1045 and run for cover if we start coming off from there.
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5 Comments
It’s now November 9: was that the election rally already? On the S&P 500 we have seen a mini-top at 1000 which is no where near the 25% retracement that you and most of us have expected.
Also, do I see a reverse head-and-shoulders formation with the top of the upside-down head at 850?
Hello Tony, Thanks for your comment. While bear market rallies ‘often’ see a 25% recovery, we should always be on the guard for a quick return to the trend. As for the reverse head-and-shoulder formation, you will see in the hourly charts a double bottom at the same level(which means the left shoulder and head are at the same level and hence negates the formation). Should it test and break that level, then it will normally carry some distance on the downside. Also, my experience with reverse HNS is we should wait for the neck-line to break before confirming it is one, and look to trade on the succeeding dip back to the neckline. Best.Ramki
Tony, we got an 18% gain and that I think is quite something in these troubled times!
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Amazing stuff ! Thats how i see Elliot wave whats not so easy is its mastery. I am reading through your old posts to see what actually happened and the results are formidable.