When to stop shorting US stocks?
Until several important signs of the end of a bear market appear, shorting US stock ETFs carries very low risk. Sometimes, buying at the wrong time may trap for a period, but most likely will end in profit-taking. However, once the indicators of the end of a bear market appear but the operational direction has not changed, it may lead to deeper entanglement, eventually resulting in total loss.
1. When the Fed announces a rate cut or resumes QE, it is necessary to immediately sell all short positions.
2. When the Fed announces a halt to rate hikes or stops QT, it is necessary to change the strategy, focusing on long positions while considering short positions cautiously.
3. When the S&P falls below the 250-week moving average, likely to occur in the first half of 2023. This means that stock prices have returned to the level of seven years ago. A break below the 250-week MA indicates that the bear market has likely passed its midpoint. The bear market may continue for a while and may even hit new lows, but over time, the risk of shorting increases. It is necessary to change the strategy, focusing on bottom fishing, selling on rallies, avoiding shorting as much as possible after selling, and waiting for the S&P to drop again before bottom fishing again.
4. When a significant black swan or grey rhino event occurs, causing a continuous sharp drop in US stocks and consecutive new lows. To reduce systemic risks in the financial system, the Fed will quickly introduce easing measures, bringing about a sharp rebound in US stocks. After some oscillation, it will eventually turn into a reversal trend. $Tesla (TSLA.US)$ $ProShares UltraPro Short QQQ ETF (SQQQ.US)$ $Direxion Daily Semiconductor Bear 3x Shares ETF (SOXS.US)$
1. When the Fed announces a rate cut or resumes QE, it is necessary to immediately sell all short positions.
2. When the Fed announces a halt to rate hikes or stops QT, it is necessary to change the strategy, focusing on long positions while considering short positions cautiously.
3. When the S&P falls below the 250-week moving average, likely to occur in the first half of 2023. This means that stock prices have returned to the level of seven years ago. A break below the 250-week MA indicates that the bear market has likely passed its midpoint. The bear market may continue for a while and may even hit new lows, but over time, the risk of shorting increases. It is necessary to change the strategy, focusing on bottom fishing, selling on rallies, avoiding shorting as much as possible after selling, and waiting for the S&P to drop again before bottom fishing again.
4. When a significant black swan or grey rhino event occurs, causing a continuous sharp drop in US stocks and consecutive new lows. To reduce systemic risks in the financial system, the Fed will quickly introduce easing measures, bringing about a sharp rebound in US stocks. After some oscillation, it will eventually turn into a reversal trend. $Tesla (TSLA.US)$ $ProShares UltraPro Short QQQ ETF (SQQQ.US)$ $Direxion Daily Semiconductor Bear 3x Shares ETF (SOXS.US)$
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