Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

US Market Index S&P500 – Likely to Bounce off from the Extreme Negative Sentiment?

1 min read

Last couple of days you might be hearing the term that the US Market Index S&P 500 officially enters into a bear market territory. i.e S&P500 index had fallen more than 20% off its peak.

The more bearishness the people get the more extreme the price will get driven into with more and more crowded short sellers. Such kind of extreme negative pessimism in the markets is often followed by strong short-covering rallies as we all know the stonks always go up!

S&P 500 Equity Drawdown

As of 14th Jun 2022 closing, S&P 500 index ended with a drawdown of -22.39% from the All-time high made during Jan 2022.

The Street Sentiment

Extreme negative panic is among the investors as there are inflation fears, rate hike fears, recession worries, and yield curve inversions. And most of the investors are closely watching the market and panicking about every down move in S&P500. In fact, the world is watching S&P500 and is curious to know what the FED is likely to do with the rate hike.

US Yield Curve Inversion

Probably if you are paying attention to the US bond market this Monday which signaled Yield curve inversion. i.e The US 2-Year yield exceeded the 10-year for the first time since early April. Now short-term yields are higher than long-term yields.

Extreme Negative Hourly Sentiment

Hourly Sentiment turned extreme negative and the S&P500 index is preparing for a potential short-covering rally odds post FED rate announcement.

Market Profile Analysis – ES Mini Futures

Market Profile structure in ES Mini (Exponential PPOC + AB Poor High) indicates extreme pessimism and too crowded short-term sellers and short-term sellers trading inventory is getting short to too short (kind of oversold levels).

Exponential Prominent POC formation in ES-Mini Futures

Conclusion

The Crowded short-term seller’s activity and extremely negative sentiment in the markets + investor panic could very shortly it could end and brings the odds of a face-ripping rally odds towards 3780, 3900, and 4100 levels during the second half of June 2022

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

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