Friday, July 21, 2017

Finally Short

It finally feels like it is time.  I have gotten short SPX.  The final catalyst came out.  A dovish Draghi.  The good news is out there for the public to embrace.  Investors scared of tightening central banks have now gotten back into the pool.

The 2500 SPX psychological barrier is also another part of it.  Very few mention it, but most investors who set targets also put in sell orders around those big round numbers.  And the tendency is to put them just before that big round number.  So there should be plenty of this type of big round number-based resistance at these levels.

There are bearish catalysts out there on the horizon as well.  The budget battle/debt ceiling, potential ECB taper announcement in late August (Jackson Hole) or at the meeting in September, etc.  Also seasonally it is a weaker time of year for stocks, from mid July to September.

This is an intermediate term short, looking for a move down to 2420.  It should take a few months to chop around before the trend reverses, so no long term short yet.

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