We have recently become cautiously bullish after maintaining our bearishness since the dive in 2018 that remained a hair's length away from a formal bear market.
There are, however, indications that investors may have been lulled by a sense of complacency. We also doubt our own recent bullishness, as we are concerned that investors are only thinking about the short term, despite increasing long-term risks.
CBOE Equity Put to Call Ratio Chart
Bearish prices for put options decreased compared to call options and reached extremely low levels, which were rarely achieved in this bull market.
The recent rally was spread among 82 of the listed companies that were trading above their 200 DMAs – a two-year highest. This suggests a broad participation and in combination with the lowest put / call ratio we see a red flag.
Another measure whose measure is extreme – and therefore potentially untenable – is ETF & # 39; s. Traders seem to be placing a lot of eggs in a few baskets and bet overwhelmingly that the stock rally will continue.
ETS traders aggressively on stocks
As we can see in the graph, traders raised the lever lung, while drastic shorts with levers drastically decreased, another sign of a potential herd mentality.
SP Daily Chart
While the price is moving towards a new record high, the RSI and MACD both offer negative differences. If the RSI were to re-test its previous low and break, we could see the price follow.
For the RSI, this is the most overbought situation since January 2018, while for the MACD it is the highest since February 2019.
Trading Strategies
Conservative traders would fail to do so because the trend is still ongoing.
Moderate traders risk a short with a rate of less than 3,200, below the lows of December.
Aggressive traders can risk a short short position, provided they understand the risks and have prepared a trading plan accordingly.
Trade sample
Listing: 3275
Stop loss: 3300
Risk: 25 points
Target: 3200
Reward: 75 points
Risk: reward ratio: 1: 3
