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February 17, 2022

How To Trade SPX (US500) During Crisis

Frank Cabibi

Many, including president Biden, expect Russia to invade Ukraine within the next couple days. More troops have garrisoned the borders between the two conflicting countries, and uncertainty dominates political and economic sentiment. The SPX500 is down 1.25% today at the time of writing this. With a short-leaning bias on equities, here is how to trade SPX during this international conflict.

Bearish Until Proven Bullish

The market is clearly not in a great spot, and trading against the headwinds is not ideal right now. This conflict seems like it will be resolved relatively soon, and by resolved, I mean that Russia will either invade Ukraine or step down and return home. In the meantime, we have major political figures heavily anticipating an attack by Russian forces. So, things aren't looking up right now. This means that there is no reason to try to find bullishness in the market until this situation has ended.

COT is also not telling us enough for a shift in sentiment as both long and short contracts are decreasing overall within the past week. On the other hand, retail sentiment is heavy bullish on tech stocks, which could help indices like NAS100.

Although I might sound very negative towards stocks, I also don't want to force any long trades if the setups/sentiment is not there. In my opinion, this is either a time to be patient and wait for resolution or look for short term sells.

How To Trade SPX & NAS

how to trade spx

SPX500 is struggling with that falling trend line on the 1D timeframe as it pulls back to lower levels on the day. That resistance level is also coupled with the 200 DMA which will be a tough level to break under these kinds of circumstances. Further support lies below in the $4250s.

how to trade spx

The NASDAQ is in the middle of a wedge pattern on the 1D. Selling pressure has continued this morning which could take price down towards the rising trend line. We are currently looking at the lowest levels since June of 2021 and 14-Day RSI reading of 40 after coming up from 22, suggesting that the index is no longer oversold.

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