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Why We Should Have Shorted the S&P 500 Futures

The recent movements in the S&P 500 futures have raised eyebrows, but for those paying close attention to the market’s signals, the signs were clear: it was time to consider a short position.

One of the most glaring indicators was the surge in Treasury Yields. The benchmark 10-year Treasury note yield touched 4.5%, the highest since 2007. This wasn’t an anomaly; it signaled a return to normalcy. Given that short-term rates are predicted to soar well into the 5% range through 2024, it was evident that this was not the ceiling.

Furthermore, our proprietary Global Algorithmic Trading Software (GATS)-System-M60 showed bearish signals across various trends. When dissecting its intricate details, it was evident that despite a bullish long-term trend, the short-term and micro trends were distinctly bearish.

Layer onto this the insights from our EMA Zones, and the bearish picture became even more vivid. We observed swift moves from the Momentum Zone to the Acceleration and Transition Zones, hinting at a robust bearish momentum.

Taking these signs together, it was hard to refute the bearish undertones. The market’s structure, combined with the increasing treasury yields and corroborating evidence from multiple technical indicators, made a compelling case for a short position in the S&P 500 futures.

In retrospect, the writing was on the wall, but as always, the financial markets require a balance of knowledge, strategy, and, at times, intuition. This episode is a reminder of the importance of staying attuned to the market’s whispers and acting decisively when they align.

Let us dive deeper with a brief overview:

The S&P 500 Index, or simply S&P 500, is one of the most widely recognized stock market indices in the world. Here’s a brief overview and some key points about it:

  1. Composition: The S&P 500 represents 500 of the largest publicly traded companies in the U.S., encompassing a wide range of industries. The companies are selected by the S&P Index Committee based on various criteria, including market capitalization, liquidity, financial viability, and sector representation.
  2. Market Capitalization-Weighted: The index is market capitalization-weighted, which means that companies with a larger market value have a greater impact on the index’s movement. This is different from other indices that might be price-weighted or equally weighted.
  3. Benchmark for Investors: Many investors use the S&P 500 as a benchmark for the overall U.S. stock market. It’s also a common reference point for evaluating individual portfolio performance.
  4. ETFs and Mutual Funds: There are numerous Exchange Traded Funds (ETFs) and mutual funds designed to replicate the performance of the S&P 500. The most notable is the SPDR S&P 500 ETF (SPY), which tracks the index.
  5. Economic Indicator: The performance of the S&P 500 is often seen as an indicator of the health of the U.S. economy because it includes companies from all sectors of the economy.
  6. Historical Performance: Historically, the S&P 500 has provided positive returns over the long term, though there are periods of volatility and downturns. The index has weathered various economic recessions, tech bubbles, and financial crises, but has generally trended upward over extended periods.
  7. Dividend Yield: The S&P 500 also has an associated dividend yield, which is the weighted average of dividends paid by its constituent companies. Many investors look at this yield as a source of passive income, in addition to potential capital appreciation.

Technical Analysis:

  1. Trend Analysis: The Long-Term and Medium-Term Trends were bullish, indicating a general upward movement for the S&P 500 futures over an extended period. However, the short-term indicators (STT, MT, and M60T) were bearish, hinting at a potential pullback or correction in the more immediate term.
  2. EMA Zones:
    • The Daily EMAs were positioned with the EMA 8, 25, and 50 above the EMA 89 and 200, reinforcing the idea of a long-term bullish trend.
    • The bearish market structure indicated by the color-coded EMA Zones, specifically the positioning of the Momentum, Acceleration, and Transition Zones, pointed to a likely short-term bearish momentum.
  3. MACD Analysis: The Daily MACD was below its signal line, and the negative histogram value further confirmed the bearish sentiment.
  4. Momentum Oscillators:
    • The Daily RSI(14) was below the midpoint (50), indicating a lack of strong upward momentum.
    • The Daily %K and %D, presumably from the Stochastic oscillator, also suggest a bearish divergence.
    • The Daily ADX at 11.47 indicated a weak trend, while the close values of +DMI and -DMI suggested indecision.
  5. Trading Conditions: All the mentioned conditions (EMA zones, HAS candles, DAATS, Time Bars, I-Trend, ADX, GMACD) seemed to align for a bearish outlook, justifying the system’s sell signal.

Fundamental Analysis:

Treasury Yields:

  • The rise in the benchmark 10-year Treasury note yield to 4.5% is significant. Historically, higher yields can have multiple implications:
    • Equity Valuation: As yields rise, the discounted cash flows used to value equities can make stocks appear less attractive, leading to selling pressure.
    • Borrowing Costs: Higher yields can increase borrowing costs for corporations, potentially impacting their profit margins.
    • Shift in Assets: Some investors may move from equities to bonds as they see better risk-adjusted returns in the fixed income space.
  • The return to the long-term average yield indicates a normalization, but the suggestion that short-term rates might go even higher indicates potential headwinds for equities.


Given the bearish technical indicators and the rise in treasury yields, it appears the sell signal from our GATS-System-M60 was well-founded. The fundamentals, specifically the rapid rise in treasury yields, could further provide headwinds for the S&P 500 futures in the short to medium term.

However, it’s essential to continually reassess both technical and fundamental data and be wary of potential catalysts or changes in the broader market environment.

Trade Details:

  1. Entry Point: The system recommended shorting the S&P 500 futures at the break of 4431.
  2. Current Position: As of September 24, 2023, the S&P 500 futures close was at 4320.06.

Trade Evaluation:

  1. Points Gained: If you entered the trade at 4431 and the current position is 4320.06, you would have gained 4431−4320.06=110.94 points.
  2. Percentage Return: To determine the percentage return, you’d typically divide the points gained by your entry point and multiply by 100:


So, by following the GATS-System-M60 sell signal, you would have achieved a 2.5% return on the trade so far.

  1. Monetary Return: To determine the monetary return, you’d need to know the value per point and the number of contracts you traded. For the sake of illustration, if you were trading the standard S&P 500 futures contract (which has a contract multiplier of $50 per point): 110.94 \times $50 = $5547

Thus, for every contract you shorted, you would have made a profit of $5547.

If you were using leverage, the percentage return on margin would be even higher. However, it’s essential to note that while leverage can amplify returns, it also amplifies risks.


Based on the data and the decline in the S&P 500 futures from 4431 to 4320.06, the decision to short the market would have been profitable, resulting in a 2.5% return or $5547 per contract (using the standard S&P 500 futures contract). This showcases the effectiveness of your GATS-System-M60 in accurately reading the market conditions and providing a timely sell signal.

Remember, while the trade has been profitable so far, always be vigilant about managing risks, using stops, and continually reassessing the market conditions to decide when to close the position or if adjustments need to be made.

An Average True Range (ATR) Trailing Stop is a valuable tool for managing risk and locking in profits. It provides a dynamic exit point that adjusts with market volatility, allowing profits to run during strong trends and triggering an exit during reversals.

ATR Trailing Stop:

  1. Basics: The ATR Trailing Stop is set by determining a multiple of the Average True Range (ATR). For instance, if you choose a 2x ATR trailing stop and the current 14-day ATR is 40.36 (as given by the system ), your stop would be set 80.72 points away from the highest price achieved since you entered the trade.
  2. Adjustments: As the trade moves in your favor, the ATR stop moves with the price, but it does not move against you. So if the S&P 500 futures continue to decline, the stop will adjust downward, locking in more profits. If the futures price starts to rise, the stop remains fixed at its last position.
  3. Choosing the ATR Multiple: The multiple you choose for the ATR determines how close or far your trailing stop will be. A smaller multiple (like 1x or 1.5x) will result in a tighter stop, which might lock in profits sooner but also carries a higher risk of being stopped out on minor retracements. A larger multiple (like 3x or 4x) provides more room for the trade to breathe but might also give back more profits before the stop is hit.

Implementing the ATR Trailing Stop:

Given you entered the short trade at 4431 and the futures now stand at 4320.06:

  1. Determine the Highest Price Since Entry: Since this is a short trade, we’ll consider the highest price since entry. Let’s assume the highest was the entry itself at 4431 (it might be slightly different if the price retraced upwards after entry).
  2. Set the Initial Stop: Using a 2x ATR multiple: 4431+(2×40.36)=4511.72

So, the initial ATR Trailing Stop would be set at 4511.72.

  1. Adjusting the Stop: If the S&P 500 futures drop to, say, 4300 and that becomes the lowest price since you entered the trade, you’d adjust the stop: 4300+(2×40.36)=4380.72

The ATR stop is now adjusted to 4380.72 and will stay there until the S&P 500 futures drop further, at which point it would adjust downwards again.


  1. Market Conditions: In more volatile markets, you might consider using a larger ATR multiple to avoid being stopped out prematurely.
  2. Profit Targets: While the ATR Trailing Stop is a dynamic tool, some traders also like to set static profit targets. If the target is hit, they might exit a portion of the position and let the rest run with the ATR stop.
  3. Review Periodically: The ATR itself can change as market volatility shifts. Regularly reviewing and possibly adjusting your ATR multiple can ensure it remains in line with current market conditions.

In the end, the key is to strike a balance between protecting profits and giving the trade enough room to reach its potential. The ATR Trailing Stop is a powerful tool in this regard, but it’s essential to tailor it to both the market conditions and your trading style.


While the ATR Trailing Stop is one valuable approach to managing a position, there are several other strategies traders employ, depending on their objectives, risk tolerance, and market outlook. Here are some commonly used exit strategies:

1. Fixed Percentage or Dollar Profit Target:

This is where you set a predetermined profit level at which you’ll exit the position. For example, if you’re aiming for a 5% gain from your entry point, you’ll exit the trade once that level is reached.

2. Support and Resistance Levels:

Many traders use technical analysis to identify key support and resistance levels. When shorting, you might consider placing a stop-loss order just above a resistance level. Conversely, a take-profit order might be set just before a support level, anticipating that the price may bounce back up from that point.

3. Moving Average Crossover:

For this, traders might exit a short position when a short-term moving average crosses above a longer-term moving average, indicating potential bullish momentum. For instance, if the 50-day moving average crosses above the 200-day moving average, it might be a signal to exit a short position.

4. Time-Based Exit:

This strategy involves exiting a position after a set period, regardless of profit or loss. For instance, if you’re trading based on a certain event or news release, you might decide to exit after a specific number of days have passed.

5. Fundamental Indicator Shift:

If your trade was based on a specific economic or company indicator, a significant change in that metric might signal an exit. For example, if you’re shorting based on expected poor company earnings and the company reports a surprise profit, it might be wise to re-evaluate your position.

6. Partial Scaling Out:

Instead of exiting the entire position at once, you might choose to scale out of the position gradually. For example, after achieving a certain profit level, you could close half of the position and let the rest ride with a trailing stop.

7. Option-Based Protection:

If you want to protect a profitable futures position, you can buy a corresponding call option for short trades (or put option for long trades). This strategy acts as insurance, capping potential losses if the market moves against your position.

8. Mental Stops vs. Hard Stops:

While hard stops are actual orders placed with a broker, mental stops are where you decide in advance the price at which you’ll exit, but don’t place an order. Once the price is reached, you then decide whether to sell based on current market conditions. Some traders prefer this method to avoid being “stopped out” on short-term price spikes.

9. Risk-Reversal or Hedging:

If you’re uncertain about the short-term direction but want to maintain your position, you might consider taking an opposite but smaller position as a hedge. This can help reduce potential losses from adverse price movements.

Choosing the right exit strategy often involves a combination of these methods, tailored to the specific trade and broader market conditions. Regularly reviewing and adjusting your strategy is essential to optimize your trades and manage risk effectively.

The concept of using Exponential Moving Average (EMA) zones as an exit strategy is rooted in the principle that these zones represent various phases or momentum stages of a particular trend. Zone crossovers can indicate shifts in the market’s momentum, and thus, serve as potential exit (or entry) signals.

Using EMA Zones for Exit Strategy:

  1. Momentum Zone Crossover:
    • Bullish to Bearish: If the price crosses below the Momentum Zone (Lime Green EMAs: EMA 1 to EMA 8) and enters the Acceleration Zone, it might be an early sign of momentum loss. This could be a cue to tighten stop-losses or to consider taking partial profits.
    • Bearish to Bullish: If in a short trade and the price rises above the Momentum Zone, it might be an indication of bullish momentum, signaling a potential exit from a short position.
  2. Acceleration Zone Crossover:
    • Bullish to Bearish: A move from the Acceleration Zone (Medium Sea Green EMAs: EMA 9 to EMA 15) to the Transition Zone can further solidify the indication of a trend change. Exiting or reducing the position here might be wise to lock in profits.
    • Bearish to Bullish: A reversal from this zone to the Momentum Zone could indicate a resurgence of bullish momentum.
  3. Transition Zone & Value Zone Crossovers:
    • A move from the Transition Zone (Pale Green EMAs: EMA 16 to EMA 25) to the Value Zone (Light Gray EMAs: EMA 26 to EMA 50) can indicate that a correction might be underway. Here, the decision might be to exit the position or set a trailing stop to protect profits.
    • Conversely, for a short position, if the price moves upward through these zones, it’s a potential exit signal.
  4. Correction Zone & Trend Reassessment Zone:
    • When the price crosses from the Correction Zone (Light Coral EMAs: EMA 51 to EMA 89) to the Trend Reassessment Zone (Salmon EMAs: EMA 90 to EMA 140), it might suggest a deeper reversal or trend reassessment. In a profitable short trade, this could be a zone to exit, as the price might consolidate or reverse for a while.
    • Conversely, for a short, if the price climbs upwards through these zones, it could be a strong indication to cover the short.
  5. Exiting in the Long-term Trend Zone:
    • If the price reaches the Long-term Trend Zone (Brick Red EMAs: EMA 141 to EMA 200), it indicates that the trend has experienced a significant change. Whether long or short, it’s worth reassessing the position and possibly taking profit or limiting losses.

Practical Considerations:

  • Multiple Confirmations: Using zone crossovers along with other indicators (like MACD, RSI, or ADX) can offer stronger exit signals.
  • Zone Thickness: The thickness or breadth of each zone can also offer insights. If a price swiftly moves through a zone, it’s a stronger signal than a gradual drift.
  • Volume Analysis: Pairing zone analysis with volume can help confirm the strength of a move. For instance, a zone crossover with increasing volume can validate the potential of the move.
  • Market Sentiment & News: Always be aware of external factors, such as significant news events that can influence price movements beyond technical factors.

In summary, EMA zones can be a potent tool to systematically map out potential exit points. By observing how price interacts with these zones and aligning observations with other technical or fundamental factors, traders can optimize their exit strategies for maximized gains and minimized risks.

Let’s delve deeper into the intricacies of Entry & Exit rules utilizing EMA Zones.

Entry Rules Using EMA Zones:

  1. Momentum Zone Entries:
    • Bullish Entry: When the price has been in a lower zone (e.g., Transition Zone) and re-enters the Momentum Zone (Lime Green EMAs: EMA 1 to EMA 8), this can be a sign of a strong bullish reversal or trend continuation. An entry can be considered when the price closes firmly within this zone.
    • Bearish Entry: If the price falls swiftly from the Momentum Zone into the Acceleration Zone, it may indicate a potential bearish movement. A short entry could be considered if other technical indicators align.
  2. Acceleration Zone Entries:
    • Bullish Entry: Price holding steadily or bouncing within the Acceleration Zone (Medium Sea Green EMAs: EMA 9 to EMA 15) after a pullback can be an entry point, indicating potential upward momentum.
    • Bearish Entry: If the price declines from the Transition Zone into the Acceleration Zone and shows signs of further decline, this might be an opportunity for a short position.
  3. Transition Zone & Value Zone Entries:
    • These zones act as a buffer. If the price consolidates within the Transition Zone (Pale Green EMAs: EMA 16 to EMA 25) or the Value Zone (Light Gray EMAs: EMA 26 to EMA 50), it may be building momentum for a bigger move. Entering on a breakout or breakdown from these zones can offer a solid risk-reward ratio.

Exit Rules Using EMA Zones:

  1. Momentum Zone Exits:
    • Bullish Exit: If you’ve entered a trade during the Momentum Zone and price starts to dip back into the Acceleration Zone, it may be a cue to take profits or at least move your stop loss to a break-even point.
    • Bearish Exit: Conversely, for short trades, if the price rises back into the Momentum Zone from below, consider closing or reducing your position.
  2. Acceleration Zone Exits:
    • Bullish Exit: If the price drops through the Acceleration Zone after a long entry, this could be a signal to exit or tighten the stop. This may indicate a slowing bullish momentum or a trend change.
    • Bearish Exit: Conversely, a rise through this zone when in a short position might signal diminishing bearish momentum.
  3. Transition Zone & Value Zone Exits:
    • These zones are critical. If, after entering a trade, the price breaches and closes beyond these zones, it’s a clear signal that the initial trade premise might be invalid. Depending on your trading strategy and risk management, it might be prudent to exit or reduce exposure.

Additional Considerations:

  • Zone Thickness & Price Movement: A swift move through a zone (e.g., price quickly passing through the Transition Zone) might indicate strong momentum, whereas a gradual drift might suggest a weaker move. This can influence your decision to either stay in the trade or exit.
  • Confluence with Other Indicators: Ensure you’re not making decisions based on the EMA Zones alone. Other indicators, as previously discussed (like MACD, RSI, or Volume), can offer valuable confirmations or counter-signals.
  • Re-entries: In volatile markets, the price may move in and out of zones frequently. If you’ve exited a trade due to an adverse zone move, but the price quickly re-enters the favorable zone, consider re-entering the trade if other conditions remain conducive.

The EMA Zones, when used with discipline and in tandem with other technical tools, can provide a systematic approach to entries and exits. As with any strategy, it’s essential to be aware of potential false signals and to always have a risk management plan in place.


Risk Disclaimer

All investments come with the risk of losing capital. The contents of this article, including any financial analyses and forecasts, are provided for informational purposes only and should not be construed as financial, investment, tax, or legal advice. Before making any investment decision or implementing any financial strategy, individuals should consult with a financial advisor or conduct their own due diligence and thorough research.

Past performance is not indicative of future results. Investing in the stock market and other financial markets involves risk and the potential loss of principal. There are no guarantees in investing. Diversification does not ensure a profit or protect against a loss in a declining financial market.

By reading this article, the reader agrees to not hold the author, the publishing platform, or any affiliated entities responsible for any financial or investment decision made based on the information provided herein.

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“Riding the Bear Market: My Calculated Gamble on Corn Futures”

Today, as I look at the corn futures market, it’s hard to ignore the weight of bearish sentiment that has taken hold. Currently priced at $476.61, the market seems to be in a downward trajectory, and my proprietary Global Algorithmic Trading Software (GATS) only serves to reinforce this outlook. The Long Term Trend (LTT), Medium Term Trend (MTT), Short Term Trend (STT), and even the Micro Trend (MT) are all waving red flags of caution. It’s a veritable sea of bearish indicators.

The time feels ripe for a short trade. I’ve calculated my risks and decided on a Stop Loss at $506.09. This figure isn’t pulled out of thin air; it serves as my emergency exit, my financial airbag if things were to suddenly reverse. But let’s delve into why I’m confident about my bearish position.

Firstly, the color-coded EMA Zones have shifted to a bearish market structure. This is usually the first sign I look for, and it’s a strong indicator that the market’s gears have shifted. Then, my attention turns to the Global HAS candles, which have flipped red. This sends me a strong visual cue that the bulls have retreated and the bears are out in full force.

But I don’t act on impulse. Additional confirmation comes from my DAATS indicator, situated above the candles, which in my trading experience usually spells more downward movement. The Global Time Bars for different time frames—M240, M1440, and M10080—are all red too. This aligns with my belief that the bearish sentiment is not just a blip but has a grip across different time horizons.

What’s more, the Global I-Trend’s green line has dipped below the red line, and the Global ADX has surpassed 20, indicating not just a bearish trend but a strong one at that. Finally, the GMACD—incorporating Signal, Main Trend, and Major Trend indicators—all point downwards. It’s like the stars have aligned, but in this case, the stars are my suite of technical indicators.

So here I am, about to pull the trigger on this short trade. Of course, the world of trading is fraught with risk, and I am keenly aware that external factors like sudden geopolitical events or drastic changes in weather patterns could upend my analysis. But that’s what the Stop Loss is for, a final line of defense against the unpredictable.

As I finalize my position, I can’t help but acknowledge the blend of science, experience, and a little bit of that trader’s gut feel that goes into this moment. The bearish trends in the corn futures market may not last forever, but for now, I’m betting that they’ll stick around a little while longer.

As someone who’s felt the thrills and spills of the trading world, I can’t stress enough how important it is to approach this game with a calculated sense of caution. Listen, I get it. The allure of potential profits can often dazzle us into forgetting the inherent risks we’re taking. But never underestimate the volatility of the market; it’s like a rodeo bull—unpredictable, powerful, and capable of throwing you off in an instant.

First off, remember that past performance is never indicative of future results. The market has a sneaky way of making us feel like fortune tellers, especially after a few successful trades. But even the best strategies can hit rough patches. Even your trusty algorithms and indicators are subject to new variables they haven’t seen before. And let’s face it, if predicting market movements were easy, we’d all be sipping cocktails on our private islands by now.

Let’s talk about leverage, that double-edged sword. While it can magnify your gains, it can also just as easily amplify your losses, and drain your trading account quicker than you can say “margin call.” Use leverage cautiously, and always consider whether you can afford the multiplied risk.

Stop Losses? They’re great, but they’re not a bulletproof vest. In fast-moving markets, your Stop Loss might not execute at the level you’ve set, and you could end up losing more than anticipated. It’s a safety net, not an impenetrable fortress.

And while we’re on the topic of safety nets, never invest money you can’t afford to lose. Risk capital should be disposable capital. Trading should never jeopardize your financial well-being, your home, or your future. There’s no trade opportunity worth that kind of risk—ever.

Trading is not a sprint; it’s a marathon, complete with hurdles, pit stops, and occasional cramps. Your emotional and financial well-being are at stake, so make sure you’re fit for the race.

In a nutshell, the market doesn’t owe us anything. It’s an arena of potential, both for gain and for loss. So when you step into it, arm yourself with as much knowledge as you can, treat every decision with the weight it deserves, and never forget to look out for number one—you.

Trade wisely, and always keep these warnings in mind. They’re not just words; they’re your first line of defense in the unpredictable, often unforgiving world of trading.

About the Author: Dr. Glen Brown

Dr. Glen Brown wears many hats, but they all fit under the broad brim of financial acumen. With over a quarter-century in the finance and accounting world, he’s the mastermind behind Global Accountancy Institute, Inc. and Global Financial Engineering, Inc. As President & CEO, he has catapulted these organizations into the global spotlight, breaking down the walls between accountancy, finance, investments, trading, and technology.

Holding a Ph.D. in Investments and Finance, Dr. Brown’s expertise isn’t confined to textbooks. He serves as the Chief Financial Engineer, Head of Trading & Investments, Chief Data Scientist, and Senior Lecturer in various financial disciplines. This showcases not just his comprehensive knowledge but also his commitment to blending practical applications with academic prowess.

However, don’t mistake him for just a numbers guy. The heartbeat of his leadership lies in a philosophy as intricate as any financial model: “We must consume ourselves in order to transform ourselves for our rebirth. We are blessed with subtlety, creative imaginations, and outstanding potential to attain spiritual enlightenment, transformation, and regeneration.” These words aren’t mere slogans; they are the DNA of his leadership style, driving every innovative endeavor and investment decision.

Through this unique philosophical lens, Dr. Glen Brown continues to lead with vision and integrity, offering cutting-edge financial solutions to complex challenges. His dedication to innovation and personal growth shapes the corporate culture at both the Global Accountancy Institute, Inc. and Global Financial Engineering, Inc., making them powerhouses of financial ingenuity.