Tightening Stops on S&P 500

In the last S&P 500 post, stops for current trend following long positions in the S&P were moved from 991.96 to 1019.94. Stops now move up to 1029.37, after a close brush within 10 points of the previous exit stop level.

In this exercise, we are using simple measures to follow price trend for potential profit. We are not currently focused on picking tops and bottoms. Instead, we are trying to harness the middle section of major price moves. Because we believe there to be greater downside risk in the market right now, we are using exit stops that are placed at levels tighter than a reversal of the entry signal itself.


As noted on the chart above, a move below the new exit stop of 1029.36 would take us out of this trade. A move above the current trend high at 1101.36, would allow us to look for price support at higher levels, which we could move exit stops towards.

AGGRESSIVE SHORT SALE SET UP
A move below the stop of 1029.36 is a set up for anyone wanting to sell the market short against the 1101.36 as a stop loss level. Why is this considered aggressive? It is not considered aggressive because it is short sale set up. It is considered aggressive because we would not yet have confirmation of a major trend change via the weekly 13 & 40 moving averages that have followed the major trends in this market so well.

Why would we consider taking an aggressive stance here? We believe that this market has been in a counter trend rally. We believe that it is most likely the case that a massive secular bear market is still in its early stages. By reading previous S&P 500 posts, you will see that this stance has been a consistent one. When this market turns back down, it could do so with a vengeance. Such a downturn has the potential to be an extremely profitable trend.

P.S.
There will be those who say the market has crashed partially because of short sellers. Let it be known that we have been showing our hand before we even sell short. Let it be known that we are following the price trend up and down -that we are also buying the market. The large rallies you will see in the decline will be mostly because of short sellers covering positions. This recent rally has given you a final chance to get your affairs in order, and to create exit plans for your portfolio. If you fail to do so, and then desire to blame someone, go straight to the largest mirror in the house. That guy you are looking at that spent his time watching the news, football, and American Idol with his free time is the guy you need to blame. If the scenario of a major collapse is proven to be correct, the market will be collapsing because that is what markets do. They go up and down, your failure to recognize that is no one's fault but your own. If the scenario is proven incorrect for now, then that will simply mean the collapse has been postponed.