Trading the trend: long S&P 500
Profit-taking ahead of Thanksgiving and reduced volatility could lead to a short-term correction in the S&P 500’s uptrend. We would like to use any such short-term retracement to the 4,500 mark to go long the S&P 500.
(Video Transcript)
Long copper worked out well
Good morning and welcome to this week's Trading the Trend on Wednesday 22 November 2023. In the middle of October, we went long copper and, if you look at the copper price, it has nicely risen since then.
The reason originally was that we tested support going back to May of this year and basically bounced off it at the beginning of October and then expected a reversal to happen. This is exactly what took place. Our upside target was at $8,500 and we got very close to that on Tuesday.
So, yesterday, we went up to $8,485. But since we were capped by this red line here, the 200-day simply moving average and are starting to come off now, it might be a good idea to basically cash in the profits from those longs which were made just above the $8,000 mark.
Hopes dashed for long EUR/USD
And then last week we wanted to go long EUR/USD because we expected EUR/USD to continue to advance now that it's bottomed out, but we wanted to do so on a minor retracement back towards the 200-day simply moving average, but this hasn't quite happened.
So we didn't go long onto that trade because it didn't hit our entry level. So that one is therefore not a trade. But if you are long that trade, it's probably a good idea to move your take profit stop up to the last reaction low, that is to say the low from the middle of November around $108.25 or just below this red line here, the 200-day simply moving average at $108.10.
Long the S&P 500 holds promise
Now this brings me to this week's trading trend and what I would like to do is to go long the S&P 500. Now the problem is we've already risen very sharply and haven't also taken out the early September high.
And now, with Thanksgiving approaching, we will probably see a drop in volatility and we could actually see a short-term reversal to the downside taking shape as people take profits in this market.
But we could use that profit taking to go long into this seasonally usually very profitable period of the year because we also have the Christmas Valley and we tend to have the January effect, all of which are positive for the S&P 500.
So perhaps what we could do is still to go long on a minor retracement and this is our trade for this week.
So this week's trading trend is to go long the S&P 500 around the $4,500 mark on a minor retracement lower with a stop loss a long way away, probably around 9 November 2023 low around $4,339 and an upside target which is a long-term upside target around the $4,900 mark.
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