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%.

systematic trade data

How to trade the S&P Futures

To take advantage of this setup, here’s how we’re going to place our trade for the S&P futures contract ES:

  • Place a GTC Buy Limit order for $ES_F (Jun) at 4228.00
  • Place a GTC Sell Stop order for $ES_F (Jun) at 4165.00
    • At the end of each trading day, adjust the stop order to one tick below the low over the previous three trading days
trading s&p futures

For those that prefer to trade ETFs, we use the ticker: SPY. Price points translate easily between the two, but candlesticks and volatility are much different. When trading futures, 1 tick does NOT equal $1 so only trade futures if you are experienced and understand the differences.

Stock Charts SPY 210604 2

Remember to place your stops or set stop alerts if your trade is opened and a position is taken. Once our position is open, we’ll move to a trailing stop one tick below the low of the previous three days.


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