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Trading S&P 500 Index: A 20% Rebound; Now In Overbought Range

  • Writer: Lester Davids
    Lester Davids
  • 3 hours ago
  • 2 min read

Research Notes For 19 to 24 May > https://www.unum.capital/post/r1924may

Trade Local & Global Financial Markets with Unum Capital.

To get started, email tradingdesk@unum.co.za



  • Since highlighting the Market Risk Index on Wednesday 09 April, the S&P 500 has rebounded 20%.

  • Current 7-day trend: Overbought

  • Current 14-day trend: Very Bullish

  • Opportunity for a short-term buy/long position? Buyers are in control, but there is weakness. A lower time frame look for a pullback to the 8 or 21-EMA (buy range) before the next move higher is suggested.

  • Opportunity for a short-term sell/short position? Not explicitly mentioned for the short term.

  • Current position & trend for the short term (1 to 10 days): Buyers in control but with weakness, looking for a pullback to buy.

  • Current position & trend for the medium term (2 to 4 weeks): Steady upward trend with possible consolidation around these levels.

  • Current position & trend for the long term (5 to 8 weeks): Attempting to advance whilst in a bullish regime. If it pulls back use the prior session close or 8-EMA as an accumulation zone.




Previous Post (09 April): Market Risk Index: The Weekly Reading Is Worth Noting!

*Weekly Time Frame* - Current


*Monthly Time Frame* - Current


The indicator is a custom-built risk and sentiment index, designed to assess market risk appetite, including whether sentiment is at an extreme position (i.e. excessively bullish or excessively bearish).


  1. Components:


    • Copper: Copper often serves as a proxy for global economic activity. A decline in copper prices could signal slowing economic growth, increasing risk.

    • High Beta vs Low Beta: High beta stocks tend to be more volatile than low beta stocks. A widening spread between high and low beta returns might indicate increased risk aversion.

    • Growth vs Value: Growth stocks typically outperform value stocks in bull markets. A shift towards value stocks could suggest investors are becoming more cautious.

    • EM Currencies: Emerging market currencies can be sensitive to risk appetite. A weakening of EM currencies could signal increased risk aversion.

    • AUD/USD: The Australian Dollar is often used as a proxy for global risk sentiment. A decline in AUD/USD could indicate increased risk aversion.

    • Consumer Staples vs Consumer Discretionary: Consumer staples are generally considered defensive assets. A shift towards consumer staples could suggest investors are seeking safety.

    • Semiconductors vs S&P 500: The semiconductor sector is cyclical and sensitive to economic downturns. Underperformance of semiconductors relative to the broader market could signal increased risk.

    • Russell 2000 ETF: This ETF tracks small-cap stocks, which are generally considered riskier than large-cap stocks. Underperformance of the Russell 2000 could suggest increased risk aversion.

    • U.S. Dollar Index (Inverse): A strengthening US Dollar often signals a flight to safety, suggesting increased risk aversion.

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