On August 28th, we provided short term traders with a low-risk entry point to short the S&P 500, anticipating a pullback into the August 31, 2018 Federal Reserve SOMA portfolio maturity (QT). It is now time to take profits, if you haven’t done so already. The maximum profit to-date has been 27.50 points, or $1,375 per contract.
Specific to this trade, we believe the weakness in the first two trading sessions of September are due to the liquidity drain of the SOMA portfolio maturity. July 2018 also had a SOMA portfolio maturity on the 31st and the low close for August was realized on the first trading session, with the low price for August realized during the second trading session. September might likely look similar with the lows of the month established in the first couple of days.
Subscribers to our work are encouraged to read the September edition of The Cartography Corner, as an important support level for the S&P 500 highlighted in it is close to being breached. If breached there is little resistance in the way of a larger decline.
The link below penned by GTA provides a user’s guide to this analysis.
Lance Roberts is a Chief Portfolio Strategist/Economist for RIA Advisors. He is also the host of “The Lance Roberts Podcast” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report“. Follow Lance on Facebook, Twitter, Linked-In and YouTube