As per my morning post, I am now looking for a short term trading low in the S&P 500. We have seen a good move lower and as a short term trader, I am now looking to profit from the panic and hysteria at these levels. The best times to short are when everyone wants it and the best times to buy are when no one wants it. This is a short term trade only and needs real discipline and tight risk. Hopefully the charts below demonstrate my thinking at this juncture.
Firstly, we are seeing bullish divergences on the 5min chart with a clear 3 step push lower. These ending wedges and 3 push moves are ending patterns and great setups for a turn.
S&P500 5min Cash:
Secondly, price is coming into clear support/low end of the range on the Daily. As shown, 1245/1250 is the area of the previous March low and also an area where A=C off the high
S&P 500 Continuous Futures Daily:
Finally, there is also a clear fib relationship between the 2 major waves lower off the July high. Wave (iii) or C is 1.618(i) at 1246.
S&P Futures 15mins:
Thus there is a clear buy zone at 1246 to 1250 in the S&P futures. I would be buying a small position when the cash market opens and then adding with confirmation i.e. hammers/break of the ending wedge/whatever confirmation from price you use. This is a great risk/reward trade with stops below 1240 and the target at least 1265/70.
As a final backdrop, AUDUSD has now played out my Double top pattern and I would be covering shorts. Once again, you have to develop a low risk idea at all times and characterise the market for the best possible trade. Here we are trading back into good supports and the upward trendline.
AUDUSD Daily:
