Which Way Wednesday – S&P 3,800 Edition

Monday’s shorts are still going strong.

Of course we cashed most out already but even now (7:45), the Dow (/YM) Futures are still above the 31,000 line, which is our shorting line for /YM and the S&P Futures (/ES) only just crossed back below 3,800, which is our shorting line for /ES.  As I noted in yesterday’s Morning Report:

It’s an interesting way to start the year and we’ll see how things play out but we’re still shorting those index lines at Dow (/YM) 31,00, S&P (/ES) 3,800, Nasdaq (/NQ) 13,000 and Russell (/RTY) 2,100 and we’d love to see Oil (/CL) closer to $55 so we can short that into tomorrow’s inventory report as further OPEC cutbacks aren’t going to make a dent in the surplus we have going on.  For now, we can use the $52.50 line as our shorting zone with very tight stops above. 

The hardest thing about trading the Futures is all the NOT trading the Futures you have to do in between.  It’s been a long time since we’ve played the indexes but we now have a nice alignment of good, solid resistance points to guide us and market conditions that are truly toppy so the risk/reward profile brings us back to Futures trading for the first time in quite a while.

Unfortunately, I can only tell you what is likely to happen and how to profit from it – the rest is up to you.  On Monday, for example, I said:

According to our fabulous 5% Rule™, the Nasdaq topped out at 13,060 and 12,900 is the 7.5% line up from 12,000 and 13,200, of course would be the 10% line and a rejection of that 1,200-point run would be 240-points but we’ll call it 250 and that make 12,950 the weak retrace line.  If that holds, we should be worried but, if it fails, the next support is way down at 12,700 so that’s the next shorting zone we can play.

If you missed Monday’s call (and you would not if you subscribed HERE) I would not chase the Nasdaq this morning but play the S&P as it crosses back under the 3,800…

Provided courtesy of Phil’s Stock World.