Emini Futures Trading Analysis- 27Feb2020

Hello Folks, the S&P500 futures are at 2937.00
The futures have lost 400 points or nearly 12% in last 6 days.
Its like a free fall, which I have not seen in the last 20 years.

This was my mail last Friday, Feb 21, when the futures were at 3339.
“Just fyi, the major support is currently at 3320, and that’s also our absolute stop loss for any long trade, because below 3320, the uptrend will break, and volatility will spike up, so we will just step aside below 3320.”
This has played out exactly as expected, but the magnitude of this correction is mind numbing. Nothing in my analysis or trading systems could predict this sharp one-way downmove of 400 points, along with a few 50-80 point pullbacks along the way, to close most of the short positions too.

All investors and traders have been impacted in some way, except those who were fully in cash below 3320, or who had hedged their portfolios with Put options, etc.

SPXL, the 3X leveraged ETF of S&P500 index, which I track closely, has dropped from $76 to $50 in last 6 days – that’s 34% correction on very conservative 3X leverage!

The sharpest fall of last 20 years was in Oct 2008, but even that had periodic pull backs except on one particular day. To have a series of deep red days with no buying is rare, and the magnitude makes this very rare. This is the fastest 10% correction from a lifetime high, done in 6 days. So market history was made today.

This major correction has completely broken the uptrend, and the S&P500 futures have fallen below their 200 day SMA (simple moving average) of 3056 today. That 200 day SMA is still in uptrend. The futures should ideally test that level one more time before falling further, but many things are not happening currently as per usual analysis.

As of now, our upside target for 2020 is still on at 3600, so I am expecting a recovery to 3400 level. But the downside support levels are at 2850 and 2750, so trades can’t be taken in the current volatile market conditions.

I still can’t believe we are talking about these numbers in Feb 2020! There is extreme fear currently. People are behaving like the world will end by December 2020. The current situation is very rare and needs very different kind of analysis to decide the way forward. I will mail you tomorrow. There is no trade currently of any type. Thanks.

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