Fed Pivot Hope Turned Into a Bull Trap; Approaching Support
In our trading plans published post-NFP on Fri., 12/02, we wrote: “After 20 days of meandering around 3950/4000 level, the index rocketed out of the range to a session high of 4093.50 on the FOMC day, 11/30/22. This morning’s Non Farm Payrolls data could be suggesting that it could potentially be an “irrational exuberance”, and the futures’ reaction so far post-NFP points to this proving to be the case. Of course, how the index trades in the regular session and how it closes today will hold further clues to this”.
Last two sessions turned the recent spike up into a bull trap. However, our models are indicating that the index is likely to find some support around the 3910-3915 range. Longs might want to wait to see if the index holds this level, and shorts need to be nimble in taking their profits if it does.
Positional Trading Models: Our positional trading models went into today’s regular session with a short opened on Monday, 12/05, at 4014.57 with a 38-point trailing stop which was tightened to a 33-point trailing stop on Tue, 12/06. This trail from yesterday’s low of 3918.39 was hit at 3951.39 within the first ten minutes of today’s open, closing out the short with a gain of 73.18 index points. Models indicate staying flat until posted otherwise.
By definition, positional trading models may carry the positions overnight and over multiple days, and hence assume trading an instrument that trades beyond the regular session, with the trailing stops – if any – being active in the overnight session.
Intraday/Aggressive Models: Our aggressive, intraday models indicate the trading plans below for today.
Trading Plans for WED. 12/07:
Aggressive Intraday Models: For today, our aggressive intraday models indicate going long on a break above 3948, 3931, or 3912 with a 9-point trailing stop, and going short on a break below 3926 or 3908 with a 10-point trailing stop.
Models indicate long exits on a break below 3958, and short exits on a break above 3893. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 01:01 pm ET or later.
By definition the intraday models do not hold any positions overnight – the models exit any open position at the close of the last bar (3:59pm bar or 4:00pm bar, depending on your platform’s bar timing convention).
To avoid getting whipsawed, use at least a 5-minute closing or a higher time frame (a 1-minute if you know what you are doing) – depending on your risk tolerance and trading style – to determine the signals.
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.
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