S&P 500 Double Top? (Chart)
April 11, 2011
– Comments (3) |
RELATED TICKERS: SPY
, QQQ
, PSQ
Are we looking at a bearish double top? I think we are.
I am therefore short-term bearish and overweight to the short side. Unless the S&P 500 breaks above 1345, I think it'll remain flat or slightly negative, staying within the 1265 and 1344 range, according to Fibonacci Retracement levels, which you can see in the chart.
My optimal portfolio has 3 short positions for every 2 long positions. I am testing my hypothesis by maintaining a long position in 5 S&P 500 futures contracts (/ES) with a delta of 250 and a short position in 19 NASDAQ futures contracts (/NQ) with a delta of -380. The deltas indicate that my trade adheres to my 3/2 allocation ratio.
Optimal Ratio = = 3/2 = 1.5
Actual Ratio = 380/250 = 1.52
A simpler trade would be to buy SPY and short QQQ (or buy PSQ) and make sure the portfolio adheres to a weighting of 3 shorts to 2 longs. For example, buying $15,000 worth of PSQ and $10,000 worth of SPY. This weighting changes as the market changes according to my models so anyone reading this probably should not do what I am doing.
Looking at the chart
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