A Sleeping Bear is No Bull!
Our models correctly called the “breather from the bear attack” yesterday, which came true for yesterday’s second half of the session and which may extend into the next session or two.
Nevertheless, as we said in yesterday’s forecast, do NOT take this as any “bullish” signs in the market! As we stated, “However, models indicate caution against establishing any new, medium-term long positions as the bias is firmly bearish. Any spikes up could be followed by swift moves down, trapping any bulls that jump in”.
Model Biases/Outlook:
With the mixed action following the midterm results, our models have adopted a cautious, “indeterminate” stand while between 2795 and 2745. As of Wednesday 11/14, this is updated to a “mildly bearish” stand while below 2755, which turned outright bearish with a daily close below 2685 on Tuesday 11/20.
As we reiterated since the midterm elections last week, “this market is still likely going to be fraught with bull traps rather than bear traps – be cautious when buying into the spikes”.
The index has tracked our bearish forecasts and has come down to test the key support level of 2610-2620 and even the 2585 level before taking a breather on 12/10, Monday. While there might be some spiky consolidation ahead, no bullish bias is seen while the index is below 2705.
A Brief Trace Back of The Current Bias/Outlook
Thursday, 09/27, our models had negated the previously adopted bullish bias and signaled a neutral bias between 2933 and 2887, which was later updated to 2920 and 2880.
On a break below 2880 on 10/10/18, our models executed the pre-published trading plan to book 142 points in profit on a short position! Our models have since adopted a “cautiously bearish” bias. This caution is in view of potential spikes up in a whipsaw mode.
As of the close on Wed, 10/24, our models turned bearish and continued to stay bearish while the index is below 2710. While within the 2710-2770 band, we reiterated an “indeterminate” bias.
As of Wed 11/14, we adopted a “mildly bearish” bias while below 2755. With the close below 2685 on Tue 11/20, we updated this to an outright “bearish” bias for Wed 11/21.
With the close of Wed 11/28, our models negated this bearish bias and adopted an “indeterminate” bias for Thu 11/29. We reiterate this indeterminate bias for today, Mon 12/10, while above 2618.
Trading Plans for TUE, 12/11:
Medium-term/long-term Investors
Our medium-term models started the month of December with indeterminate state and stayed out of the markets so far.
Last Published Trading Plan/Forecast: Our last medium-term forecast stated: “For today, Monday 12/10, our medium-term models are monitoring the 2618 level – a daily close below 2618 will be interpreted as an opening for a fresh leg down. A daily close above 2660 is needed to negate the bearish bias. Between 2660-2618, models indicate staying flat”.
Results/Outcome: After probing below our key level of 2618 by registering the session’s low at 2583.23, the daily close on 12/10, Monday, was at 2637.72 – within the range to be flat. No trades were taken.
Aggressive, Short-term, Intraday, or Professional Traders
Mon 12/10: Booked 31.25 points in profit on two shorts.
Results/Outcome: The index broke below the 2620 level by 0950am EST, triggering a short position with 8-point trailing stop. This was quickly followed by a low of 2609.47, dragging the trialing stop to 2617.47. This stop was triggered within the next ten minutes, closing the short with a modest profit of 2.5 points.
Around 1025am EST, the index again broke below the 2620 level, triggering another short position. The index then fell through the 2600 level to reach the session low at 2583.23 by 1100am EST, dragging the trailing stop to 2591.23. Around 1130am EST, this stop was triggered, closing the short for a profit of 28.75 points!
Thus, the models opened and closed two profitable shorts for a total gain of 31.25 points on this volatile day.
Today’s Plan/Forecast: For today, Tuesday 12/11, our aggressive, intraday models indicate going long on a break above 2651 with an 8-point trailing stop, and going short on a break below 2620 with a 10-point trailing stop. For the trades to trigger, the breaks should occur during the regular session hours (9:30am-4:00pm EST).
NOTE: Remember that a “trailing stop” works differently from the traditional stop-loss order. Please bear in mind that the trailing stop’s trigger level would keep chang
ing throughout the session (click here to read on the conceptual workings of a trailing-stop).
IMPORTANT RISK DISCLOSURES AND NOTICES – READ CAREFULLY:
(ii) Do NOT make your financial investment or trading decisions based on this article; anyone doing so shall do so solely at their own risk. The author will NOT be responsible for any losses or loss of potential gains arising from any investments/trades made based on the opinions, forecasts or other information contained in this article.
(iii) Risk Warning: Investing, trading in S&P 500 Index – spot, futures, or options or in any other synthetic form – or its component stocks carries inherent risk of loss. Trading in leveraged instruments such as futures carries much higher risk of significant losses and you may lose more than you invested in them. Carefully consider your individual financial situation and investment objectives before investing in any financial instruments. If you are not a professional trader, consult a professional investment advisor before making your investment decisions.
(iv) Past performance: This article may contain references to past performance of hypothetical trades or past forecasts, which should NOT be taken as any representation or promise or guarantee of potential future profits. Past performance is not indicative of future performance.
(v) The author makes no representations whatsoever and assumes no responsibility as to the suitability, accuracy, completeness or validity of the information or the forecasts provided.
(vi) All opinions expressed herein are subject to change at any time, without any notice to anyone.