SP500 Index - FAZ / SDS - EVENT HEDGE

The DEC'09 SP500 futures contract is searching for resistance and is fast approaching a major inflection points at 1067 and 1078. A strong early morning surge into this area would be the optimal opportunity to put on a hedge in front of the potential for some expiration volatility. Any trading above 1060 will be exhaustive so look for signals to jump on.

Use the 1044.25 as a momentum guide today. The longer the index is below here the more likely its in for a retreat with 1023 the initial target. This is the turning point. Hold or fold.

The trade should play out by by Tuesday and a daily close above 1067 negates the opportunity.

There is no sell signal at this time. Just the potential for an extended MKT to have a reality check in front of an event. Insurance with potential.

JS

This post supports JS Services Strategy Based Trading approach. For more information please contact me at info@jsservices.com. You can also visit http://www.jsservices.com/.The Inflection Pivot levels are available as a chart overlay on the following platforms; Ninja trader, Strategy Runner and eSignal. Sign up for a Complimentary Trial.

SP500 Hedge - FAZ and SDS - Timing is Everything

The leveraged short ETFs FAZ and SDS are a tools to manage profit give-back for a net long position in the SP500 or an equity portfolio with a high correlation to the index. These ETFs are timing tools good for a 1-week window event horizon. This week has all the makings of an opportunity to incorporate these tools into your trading plan.

The SP500 has been on a roll and will maintain this posture above the 973.25 Inflection Pivot targeting the 1014.50-1008.50 resistance band. Expectations are for a reaction from this area presenting a buying opportunity in the FAZ and SDS contracts. Have a defined risk plan on what you are willing to pay for this "insurance". If the Sep'09 SP500 futures starts to hold a trade above 1017 its likely the current Bull trend move has the potential to extend up to the 1050 to 1078 zone before it exhausts. This will be another area of opportunity to execute this strategy.

What type of volatility is going to play out this week remains to be seen, however positioning into the employment release on Friday should provide some play . The VIX above 2400 does have the potential for a pop so use this as a guide.

A break under the 973.25 Inflection Pivot will have the SP500 Index vulnerable to a corrective turn targeting the 939.50-937 support band on any set-back. 962 is the confirmation point for any break in momentum. This sell off does have the potential to extend down to 901-896 without altering the underlying positive sentiment. If the Bull run is going to keep pace either of these support areas will prove a base for the next advance and act like a pivot to work any SDS or FAZ position. Only under 892.50 is there a real threat of a sentiment shift in the Index

JS

This post supports JS Services Strategy Based Trading approach. For more information please contact me at info@jsservices.com. You can also visit http://www.jsservices.com/.The Inflection Pivot levels are available as a chart overlay on the following platforms; Ninja trader, Strategy Runner and eSignal. Sign up for a Complimentary Trial.

FAZ as an event hedge for the SP500 Index

FAZ AS AN EVENT HEDGE

The FAZ Financial Bear 3x is a short-term [read Daily rebalancing] timing tool that can be used as a hedge for a potential event day.

With Employment numbers released tomorrow and the SP500 Index at a major inflection pivot [945] the FAZ can be a good value “insurance” bet.

Buying the FAZ this afternoon or near the close and exiting tomorrow or Monday’s close.

The SP500 JUN’09 contract is currently keying off the 945 and 962.50 Inflection Pivots. Buying the FAZ on a 1 and 2 unit size ratios, 1 unit at 945 and 2 units when the SPM’09 is at 962.50.

If the recent rally is going to fizzle and turn sour it will do so off either of these inflection points and if so put the Index back in a vulnerable position with the potential to put the lower Bear trend pattern back in play for a revisit to the April’09 lows at the 780 area. Not in the session mind you but as a psychological sentiment shift that this could be so, with the expectations displayed in the price of the FAZ.

A rise above 962.50 and the Index will have another 40-50pts in it for a challenge to the 1010 level. This will be another opportunity to buy FAZ, as even a small reaction here should pay for any losses incurred on the original FAZ buys. Consider using the 3.5pt stop at each SP M’09 inflection point for any FAZ buys. Each inflection pivot level can be used with a REVERSAL strategy if stopped out as well as any violation of resistance should be sustained and hold structure if the MKT is good.

Looks like a 1 to 8 risk reward, which it should be as this is a counter trend FADE.

Insurance is not cheap but this has the potential to make something for you.

945, 962.50 and 1010 Inflection pivots. 1 unit, 2 unit and 3 unit respective opportunities. Remember the FAZ rebalances each day so pushing a position beyond a couple sessions is too much.

The best option is to use the JS Services Price Map each day to isolate the key session inflection points to leverage opportunity in the FAZ.

For more information please contact me at info@jsservices.com

JS