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S&P500 Showing Signs of Momentum Loss

By, CIFER | Updated 22nd Mar, 18.35GMT

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S&P500 Daily Chart - 200EMA, Stochastic

SHORT TERM - BEARISH: S&P500 showing slight weakness towards the end of the week as daily stochastic beginning to roll over, albeit remain overbought. With the 1 hour chart breaking multiple swing lows, the signs are there that the strong bullish momentum is fading, and a short term bearish bias is preferred. As the VIX has dropped back below its pre covid level and now sub 20, any corrective phases are expected to be shallow or if nothing else, just a period of consolidation following the loss of volatility.

INTERMEDIATE TERM - BULLISH: US Equities have been unfazed by President Biden's comments regarding tax increases as they rally into new all time highs last week. Furthermore, with interest rates so low, discounted future cash flows are increased and as such, the longer term bias remains bullish. A consolidation or shorter term pullback would relieve the intermediate term overbought conditions and set the market up for further upside.


Sell at the money calls - with the technicals pointing towards weakness in the short term coupled with low volatility - writing call options would be beneficial throughout a period of consolidation/ shallow pullback, we would be using theta to our advantage. 

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