Basic rules of technical analysis is that the trend is your friend.The trend is up in all indices and shorting in an up trend is the like you are swimming upstream on a river. You may have some luck swimming against the current but if you insist doing it you will end up drowned. Using stops does not matter you may delay the process of losing big money but sooner or later you will lose big money. I don't care if you are the best trader in the world (and it is an impossibility that you are because you are trading countertrend) , you keep shorting in a bull market you will get burned. You may get 2-3 profitable trades out of 10, but what good is that.
It is not rocket science. You buy the retracement in an bull market and you short the rallies in a bear market. Last time I looked at my charts we were in a bull market. Also I don't want to hear the market is overbought. The market can stay overbought for a long time in a bull market. Using overbought stochastics or rsi to sell short in a bull market is a guarantee money losing proposition. These are the rules when you trade off oscillators such as stochastics or rsi. In a bull market you buy when the oscillator signals oversold. In a bear market you short when the oscillator signals overbought. In a trading market you sell when the oscillator signals overbought and buy when it signals oversold.
Also I don't want to hear that the market is overvalued. It sells at 16-17 times this year earnings. Where do you see overvaluation. You can argue it is fairly valued but overvalued it is not. S&P 500 was selling 35 times earnings in 2000, that was overvalued, Nikkei was selling 70 times earnings in 1990, that was overvalued.
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