If you’ve been watching recent price action in the markets lately, you know that trading S&P futures has been nothing short of frustrating. The S&P has been fluctuating above and below the 4200 level for the past few weeks. With many people thinking this price action points to a market running out of steam, we’d like to remind traders of the saying ‘never short a dull market’. Another phrase we’ve been hearing as well, ‘don’t fight the Fed’. In fact, when you compare today’s price action with similar periods in the past, you can see just why we’re going long and how to trade S&P futures.
As we evaluated recent price action of the S&P500, here are the statistics we used to find our systematic trades:
- S&P sentiment = Between 70-80% Bulls
- Daily price change over past eight trading days = Between -0.1% to +1.4%
Since 2006, there have only been seven other times when we had a similar price and sentiment setup. The following table shows the price action around the previous seven occurrences – one can clearly see the market is skewed in the Bulls favor with every instance showing a positive return over the following 15 trading days with an average return of +1.8%.