NFP Disappointment to Embolden Bottom-fishers?
Bottom-fishers looking for stock market bargains need to be cautious about a potential bull-trap today. Bad news is NOT always good news – not in this market.
Our early 2022 trading plan – published on Tue, 01/04 – stated: “The artificial, illiquid moves could now be coming to an end and the true mood of the investors is likely to set onto the markets soon”.
This followed our last trading plan of 2021 – published on Thu, 12/23 – where we wrote: “While investors could be well advised to trim their holdings on rallies induced by these effects, bearish traders might need to wait these tides out to strike. A break of the all-time high appears likely within the next couple of weeks”. Since that day, the index has set multiple record highs.
The market rout has not even started, yet. Expect wild gyrations – it is NOT a falling knife. Both bulls and bears need to be cautious about false and sudden spikes in either directions.
Positional Trading Models: Our positional models suffered severe whipsaw yesterday, and finally settled into a short (opened at 4701.32). Models indicate tightening the trailing stop to 34 points. If hit and the short is closed, models would stay flat for the day.
Intraday/Aggressive Models indicate the trading plans below for today:
Trading Plans for FRI 01/07:
Aggressive Intraday Models: For today, our aggressive intraday models indicate going long on a break above 4730 or 4685 with a 7-point trailing stop, and going short on a break below 4720 or 4680 with a 10-point trailing stop.
Models indicate long exits on a break below 4736 and short exits on a break above 4673. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 09:36 am EST or later.
By definition the intraday models do not hold any positions overnight – the models exit any open position at the open of the last bar (3:59pm bar or 4:00pm bar, depending on your platform’s bar timing conv ention).
To avoid getting whipsawed, use at least a 1-minute closing or a higher time frame – 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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