Don’t Fight the Fed!
After going into a yawn first half-hour or so after Powell’s Jacksonhole Speech, markets seem to have come to accept the wisdom in the saying on the street: “Don’t Fight the Fed”. As we wrote in our Friday’s trading plans: “Our models indicate that the next leg could be down if the markets register a daily close below 4150 today. On the other hand, if the markets register a daily close above 4200, then the next leg could be up. If we close between these two levels, then we are likely going to be in a consolidation/indeterminate mode until these levels are broken out of”.
Markets clearly and decisively broke through our key levels indicated, and our models are in a bearish bias. Nevertheless, if you are not already short the index, you might want to be patient to establish a new short, as there is a possibility for sudden spikes up that could act as “bear traps”.
Positional Trading Models: Our positional trading models indicated on Friday, “long on a daily close above 4200 today, and going short on a daily close between 4150 and 4130”. Consequently they are flat as of this morning. Models indicate going long on an intraday break above 4115 with a 25-point trailing stop and a long exit on a break below 4130, and going short on an intraday break below 4100 with a 35-point trailing stop and a short exit on a break above 4115 or 4083.
Intraday/Aggressive Models: Our aggressive, intraday models indicate the trading plans below for today.
Trading Plans for MON 08/29:
Aggressive Intraday Models: For today, our aggressive intraday models indicate going long on a break above 4115, 4061, 4036, or 4055 with a 9-point trailing stop, and going short on a break below 4110, 4052, 4045, or 4023 with a 10-point trailing stop.
Models indicate long exits on a break below 4130, and short exits on a break above 4028. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 10:30 am 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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