Given that my purpose is to trade the index itself and i use US500 futures for it this analysis will be done using us500 futures.
Until proven otherwise the trend should be considered trendy and we should trade according to it.
The market reached a new historical high, touched what seemed to be a resistance, oscillators where quite overbought already and a correction started. This is something absolutely normal buy that we dont want to trade for 2 reasons; corrections are normally smaller moves than an impulse and they are much more unpredictable and dificult to trade. So I consider the most intelligent think to do is to allow the market to correct and look into 4h/1h charts for a reversal figure that would allow us to enter the market with a long position.
Its true that some things are going on that might create some tension on the markets and generate some doubts. Right now this are oil price, Greece situation and global real economy recovery that seems to have slowed down in the past quarters. However this and other similar things have been present on the markets for the last months and the trend has kept going, there’s been some a high increase in volatility but the trend remains unchanged. So until there is something that makes us believe that the trend is finished we should keep trying to open long positions after the dips. I’d like to check the us500 future graph with a trend following indicator such as ichimoku to observe this that I’m talking about. As you can see according to Ichimoku indicator the trend is perfectly healthy.
However there are somethings that could always go wrong, I dont like some divergences that are growing in the daily charts like the RSI and the TRIX so we should monitorize closely in case this correction is bigger than normal and then we have a totally different situation.
To conclude, for now we will try to use a very short term trend ( some days) trading system to get into the wave and trade the long. We will comment on that on my next post in the trading strategies section, follow this blog and don’t miss it!
Nuño Pérez del Barrio