Last week, S&P Futures saw extreme moves in both price and sentiment. With last week’s news of a COVID-19 vaccine, S&P Futures spiked to new all-time highs. Along with the move higher in price, sentiment also increased +8% Bulls to 69% Bulls. Looking at how the rest of this week plays out, price and sentiment should swing slightly. However, historically, both have ultimately closed higher. While this backdrop may appear bullish, the historical sentiment data tells us this setup offers a good opportunity to short for a S&P Futures pullback.

Here’s what we looked for in price and sentiment data:

  • S&P Sentiment = Between 65% and 85% Bulls
  • Eight-day price change in S&P = Between +4.2% and +8.2%
  • Eight-day sentiment change in S&P = Between +34% and +44% Bulls

Since 2006, there have only been nine other times where we had a similar setup. Those dates were: 08/02/10, 07/04/11, 07/05/11, 07/06/11, 07/07/11, 09/18/13, 10/18/13, 10/21/13, and 12/26/14.

ES 20141226

The Short Setup

  • Place a GTC Sell Stop order for $ES_F (Dec) at 3517.00
    • If this order doesn’t get filled by the close on 11/20/20, the trade is cancelled
  • Once that order is filled:
    • Place a GTC Buy Stop Loss order for $ES_F (Dec) at 3557.00
    • Place a GTC Buy Limit order for $ES_F (Dec) at 3413.00

For this trade, we’re risking $2000 for a potential profit of $5200 per contract (2.6x reward ratio).

ES 20201116


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