S&P500 Futures: To catch a falling knife or grab a bargain?
When can you catch a bounce?
I came across a thought provoking article on Market's Live Blog this am on the S&P500 futures chart. The piece was suggesting that some buyers might be buying S&P500 futures this am on the premise that after four big down days then a correction is due. Here was the chart:
Coronavirus is getting worse
The spread of the virus is much worse now. We have new cases popping up everywhere and my gut instinct is that this is now definitely going to be a global pandemic. I can't see the olympics or the Euro's going ahead and we are in for a rough ride. One US CDC official was on the wires saying that it's not a question of 'if', but 'when' it becomes a pandemic. However, markets do not fall in a straight line. For those long term equity investors we are getting some low levels to load up on longer term longs. Nice. So, if you have a 10+ year framework, there are nice bargains ahead and set to get cheaper.
When to take a bounce?
The thrust of my article is to ask the question, 'when do you take a bounce from a large fall?' I was looking at the S&P500 yesterday tempted to take a long. I'm not now as the market mood is firmly down, but I was at least looking for some kind of reversal from the stochastics to indicate a turning point alongside some softer news. Otherwise, it seems that you would just be trying to catch a knife. So, how about you? What will you need to potentially buy into these large equity falls? Do you have a rule of thumb that you go by?