FxWirePro: Fantastic downside risk-reward for S&P 500, calls included

S&P 500 has staged a commendable rally, forming a double bottom around 1815 area and currently trading at 1890 area. However, we, at FxWirePro fundamental consider this move as a correction than actual reversal and we expect the downturn to proceed further.

We expect current outflow from emerging markets to continue, which would eventually prompt investors to withdraw funds from developed market equities. Lower oil price would continue to spook investors and sovereign wealth funds to keep withdrawing from broad asset class. Moreover, weaker economic dockets and lower than expected earnings will keep weighing on S&P 500 stocks.

On the positive side, double bottom support would help S&P 500 to consolidate at current area.

Under such context, current risk-reward looks very attractive to the downside.

Trade idea 

• Sell S&P 500 at current price @1888 and at rallies, with stop loss around 1960 area and targeting 1730 area.