Despite both the S&P 500 and credit markets broadly speaking (especially the HYG and LQD ETFs, and their respective ratios: HYG:SHY, LQD:IEI and HYG:LQD) closing yesterday's session at or near their lows (thus supporting the stock downswing), the S&P 500 futures staged an overnight recovery.

As European bourses look to their open, the mood set there has the power to determine the short-term fate of this futures recovery that appears to be drawing a rounded top on the 15 minute time frame, with the 1 hour time frame being vulnerable to a downside reversal any candle now.

That's the likely scenario, because the narratives driving yesterday's plunge haven't changed, and new ones haven't captured the market's short-term attention either. But let's prepare for the possibility that this reflexive bounce might not fizzle out as quickly as could reasonably be the case in a risk-off environment of yesterday's calibre (yes, the question is how much of it rules the day also today) - time to tighten the stop-loss to close the trade in the black either way while giving profits the chance to grow further still.

Please see the Trading position section for details.

Trading position (short-term; our opinion): short positions (100% position size) with stop-loss at 3065 and the initial downside target at 2990 (it was almost hit already).

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.