The debt markets have apparently lost their appetite to go higher in a bid to erase the opening losses, and S&P 500 is slowly moving down in tune. A sizable move later today isn’t likely, but a microrotation later today or during the overnight session, isn’t out of the question.

The S&P 500 bulls didn’t take advantage of the price recovery from overnight lows just above 2770 to well over 2815, and the credit markets (HYG ETF and LQD ETF) are losing steam. This increases the likelihood that we’re not to see their immediate rebound in the session, but rather bobbing above and around their last week’s lows – and that doesn’t bode well for any S&P 500 upswing in the short-term.

Therefore, let’s consider where to reenter on the short side – please see the Trading position section for details. Given the prior downswing in the debt instruments and their recovery relative to the stock index, we’re at a better position from the risk-reward perspective right now than was the case earlier in the session.

Trading position (short-term; our opinion): short positions (100% position size) at market (that's 2815 currently) with stop-loss at 2970 and with initial downside target at 2750. Stay tuned as finetuning the open positions is likely ahead.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care