“Hey, Professor! What numbers/levels are you watching before going short?”
Great question. First, even though many are calling for a correction, I only trade what I see and not what I think, feel, or smell. Yes, while the market may stink worse than a surfeit*, only trade what you see.
With that being said, if the $SPX breaks above the upper Resistance line (green slotted) and has a successful retest, then look for an early summer run.
Now, to answer your question, I am watching four important numbers:
1. In the top box, the $VIX needs to break above 17 and have a successful test to confirm an Index breakdown. Many times, I save my bacon with this confirmation. Traders would be best served to have a confirmation indicator before putting hard earned money to work.
2. In the price box, I want to see a break of the 75 EMA and an unsuccessful retest. This 75 EMA is also in the same area as the lower $SPX trendline. “Very interesting,” as Schultz would say. If you don’t know who Schultz is, ask Grandpa.
3. Per the $COMPQ, I want to see a violation of the 65 EMA and an unsuccessful retracement.
4. With the $INDU, I am watching the 100 EMA. Same song and dance here.
In addition, since many are trading in retirement accounts where most cannot short, I prefer to go long select inverse funds. Yes, I do prefer leveraged variety protective stops. I also enter with Stop Buy Limit orders. Once again, I would not go long any inverse fund unless I had at least two indicators confirming the trade.
I hope this helps. If interested in my FREE newsletter, go to my website davidoengland.com. If you have a question for my column or Market Minute radio segments, send to thetraderseye@gmail.com.
Thank you.
David O. England
*a group of skunks
