The S&P 500 staged a dramatic rally on Friday having tagged the daily 200 moving average. After an over 10% collapse in a week, smart investors jumped into beaten-down quality stocks at the technical chart support. For those who followed me this past Friday, you know we covered a dozen short positions at the lows and grabbed multiple longs.
Where's The S&P 500 Headed?
The answer is found in the charts. The key to finding the next big short on the S&P is found by seeing where the most technical resistance signals coincide. The level is 2,760. This is the daily 20 moving average, close to a Fibonacci 61.8% retrace of the collapse as well as a full retrace of the 2 over-1,000 point drop days in the Dow Jones Industrial Average. In addition, watch the sentiment of traders and average investors. I expect that when we hit this level, many talking heads will start giving the bullish, all-clear signal. Many smaller investors will start expecting new highs and the buy-the-dip mentality will surge. All these signals will alert investors like myself to short the market for the next wave of panic/selling.