Trying to short equities during this FED fueled bubble has been a losing proposition, but we are given periodic opportunities to scalp.
Two of our reversal Indicators were triggered on Friday.
1) On the daily time frame we had "4up 1 Down" triggers across 4 of 5 of the major indicies we follow. This triggers when our 9 + 23 day adaptive channels are in a clear uptrend, and then price reverses back below the 9 high. This setup alone does not provide odds to short, however it is noteworthy to see this happen across almost all indicies on the same day.
2) Then on the weekly time-frame we see 3 of 5 of the major indicies print reversal candlesticks with a higher high intra-week, but then reversing to a lower close.
Accompanying these reversal signals we see Daily Oscillators in overbought territory, now reversing to sell signals, and weekly oscillators showing non-confirmation of the recent new highs in the Nasdaq and Russell.
Stocks have been trending nicely higher since the April lows in a clearly defined channel - As we grind higher, there are opportunities to scalp the retrace, and we are seeing signals that this could be one of those times.
Looking at the S+P we can see a potential false breakout at the 2800 level, and a 50 point pullback to the lower trend line and 23 day adaptive channel appears likely over the coming weeks.
To further illustrate this potential - looking at price distribution this year in the S+P, even though we have been in a clear uptrend for much of the year,prices have advanced at least 44.25 points and declined at least (43.75) from any random close on a rolling 20day go forward basis.
Given the reversal signals we are seeing, we are betting that another 44point decline is ahead of us over the next 20 days. You can short S+P Futures on a break below 2800 and then sell the Sep 2750 put for $31.50.
If we are wrong and prices reverse higher and give a close above 2825, then close the position, which would cost you approx 16 points across the future and option. Your max upside is 80 points for R/R of 5-1. Once you are up 2 units vs your risk be sure to lock in at least half of profits.