Selling SPX towards 5800 level

With redoubled enthusiasm, the stock market continues to recoup earlier losses. It seems these recovery movements are driven more by greed rather than contributing to a sustainable formation of a new trend, potentially leading to a new bubble within the existing V-shaped recovery pattern.

Yesterday, the S&P 500 index quotes confidently surpassed the previous local peak of 5800. Technically, this level now serves as a target for a short-term bearish correction, positioned below the current price.

The market is characterized by a tendency to always either overestimate or underestimate emerging risks. Consequently, it behaves like a pendulum that consistently overshoots its equilibrium position. The last two daily bullish candles have clearly moved into technically overbought territory and suggest the culmination of the initial phase of the S&P 500 recovery.

The zone between the 5900 level and the 6100 level represents strong resistance, which is likely to push the index price back towards the 5800 level. If market optimism takes an extreme form, a breakout above the 6150 record high remains plausible, potentially propelling prices into uncharted territory. However, the probability of a correction will become even higher. The market tends not to "forgive" such rapid, almost vertical moves from 5700 to 6150 and is likely to retreat towards the 5800 level. The main question, in this case, is determining the acceptable level of risk, as it is currently unknown how high the S&P 500 might rise fueled by this optimism. Given this, it is more prudent to sell when the price reaches 6000, as this offers a better risk/reward ratio.

The overall recommendation is to sell SPX from the 6000 level.

Profits should be taken at the level of 5800. A Stop loss could be set at the level of 6200.

The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.