The cash S&P500 formed an outside reversal day on Thursday. Regardless of the new high, the downward price pulse from Tuesday’s high of 1565.26 continues and has now gone low enough to form a Change-In-Trend (CIT) at that high. With the trendline also broken yesterday’s high could very well end not only wave v” but the larger wave iii’ from September 10th as well. The Fib ratios for the end of wave iii’ mentioned yesterday proved to be resistance. Also of note: The Gann wheel. The 2002 low was at 768. Six turn of the wheel forward is 1577.
Is a tradable high in place? For the purposes of this blog yes; and I have set up a trading account at Investopedia (the No End competition) under the name of SaxbyFox. I will be buying SH (Proshares Short S&P500 on the AMEX). Using yesterday’s close of 57.6 and a stop at 56.81 I am exposing 0.79.
This theoretical account is worth 100k. My Maximum trade share size must allow a risk for the trade, based on the stop loss, of no more than 0.5% of account equity. Therefore, for today’s trade:
100k account x 0.5% maximum loss = $500 maximum loss per trade. $500 / 0.79 stop = 632 share maximum.
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