Shorting S&P 500 from 5600 points
S&P 500 index futures are moving inevitably towards a correction. Signals from the commodity and debt markets suggest a standard 5-7% correction in the following two months. Considering the slowdown of the American economy, a correction could exceed 12-15%.
The benchmark added 12.6% to 5538 points since the last correction during April 1-19. The U.S. economy grew only 1.4% during Q1 2024. According to the Atlanta Federal Reserve (Fed) GDPNow model, GDP is projected at 1.5% in Q2 2024. This is very low and does not correspond with the 16% rise of the S&P 500 this year. Thus, when the index hits the extreme target at 5600-5650 points in the coming weeks, the chances for a deep correction would rise dramatically.
A short trade could be opened from 5600-5650 points, with a stop-loss at 6050 to avoid elevated volatility. The first target is at 5100-5200 points. The second target is located at 4700-4800 points and could be achieved in case of political turbulence in the United States.
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