Day 3: The Chop-chop Train Chugging Along the Bulls To The January High and Beyond? This Week to Decide!
Our forecast for the S&P 500 Index for yesterday, Monday, stated: “Our models continue to indicate the S&P 500 Index as being stuck in an “indeterminate” state, with no clear bias in either direction, while within the broader 2842-2795 range (upper range moved up by two full points).” (click here to read the full report/verify this claim).
The index, on Monday, closed at 2850.40 – comfortably above our models’ indicated range, indicating a new bullish leg taking shape in the markets. The likely target to take out next is the January high of 2872.87, with not much of meaningful resistance in the way. The only thing that can thwart this journey to another all-time high is potential geopolitical news that could prove highly negative for the markets. Barring any such developments, the next stop for this move appears to be 2873+ in a week or two.
Model Biases/Outlook:
The action of the market on Monday confirms the bear-trap from the last week’s action. The close above the upper bound of 2842 at 2850.40 is interpreted as the decisive victory for the bulls in the last few days’ of battle for dominance.
Our models are now clearly sporting a bullish bias. If the index closes above 2852 this week, then the index is indicated to move to take out the January high of 2872.87. New highs could very well occur within this week as well, barring any negative geopolitical developments. There is no bears in sight, all the way to below 2815.
A Brief Trace Back of The Current Bias/Outlook
After 14 consecutive days of bearish bias, our models have negated the bearish bias on last Friday, 07/06/18 when it closed at 2759.82! Since then, our models have been consistently forecasting bullish strength and are yet to flash any concerns about any bears in sight, until Friday, 07/27.
After reiterating the bullish momentum for 21 consecutive days, our models now abandoned the bullish bias with the action on last Friday 07/27, but have NOT replaced it with bearish bias yet. We are in this “neither bullish, nor bearish” state since then, and repeat it for today, Monday, 08/06.
Eight days after the “neutral/indeterminate” bias entered into on Friday 07/27, our models have resumed the bullish bias today.
Trading Plans for TUE, 08/07:
Medium-term/long-term Investors
Medium term models indicate a bullish state for the S&P 500 Index. For Tuesday’s regular session, the medium term models indicate going long on a break above of 2852 from below. If the market opens much higher, then wait for a pullback or for a break above 2862.
Being cautious of potential negative geopolitical newsflows, models indicate using a tight trailing stop of 8 to 12 points (depending on your individual trading style and risk tolerance).
(click here to read on the conceptual workings of a trailing-stop)
Aggressive, Short-term, Intraday, or Professional Traders
Aggressive intraday models indicate using the 2856-2835 as the pivot band to place trades off of.
Above 2856, models would go long with tight trailing stop (about 6 points), and stay flat between 2850 and 2835; below 2835, models would go short with a tight trailing stop (about 6 points). To avoid getting caught up in whipsaws and overtrading, wait for a confirmation of the breakout of these levels on at least a 15/5/1 minute bar, depending on your trading style and risk profile.
(click here to read on the conceptual workings of a trailing-stop)
IMPORTANT RISK DISCLOSURES AND NOTICES – READ CAREFULLY:
(i) This article contains personal opinions of the author and is NOT representative of any organization(s) he may be affiliated with. This article is solely intended for informational and educational purposes only. It is NOT any specific advice or recommendation or solicitation to purchase or sell or cause any transaction in any specific investment instruments at any specific price levels, but it is a generic analysis of the instruments mentioned.
(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.