When Bad News is Celebrated ‘Cause It’s Not Worse

Notwithstanding the FOMC’s initiation of aggressive tightening with yesterday’s 50 basis points hike in interest rates, markets seemed to have celebrated that the committee was not considering a 75 basis points hike. That steep rise in markets seem to be dissipating in the first hour of the regular session this morning. If you are itching to go long this market, you might want to wait how today’s market action pans out before jumping in.

We ponder, yet again, this morning: Another potential bull trap indicated around 4307.66 (yesterday’s intraday highs) or an interim bottom cemented at this Monday’s lows around 4050? We might have to wait till Monday’s close to get some sense of conviction on either side.

Positional Trading Models: As per the trading plans published on Tuesday: “If the daily close is above 4262, models will close the short and remain flat”. We got that close yesterday post-FOMC decision, and the positional trading models closed out the short for a loss of 168.24 index points. Positional trading models are in an indeterminate state for today.

Intraday/Aggressive Models indicate the trading plans below for today:

Trading Plans for THU 05/05:

Aggressive Intraday Models: For today, our aggressive intraday models indicate going long on a break above 4205, 4188, or 4156 with a 10-point trailing stop, and going short on a break below 4193, 4180 with a 10-point trailing stop. 

Models indicate long exits on a break below 4185. They also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 10:16am ET 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 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.

(WHAT IS THE CREDIBILITY and the PERFORMANCE OF OUR MODEL TRADING PLANS over the LAST WEEK, LAST MONTH, LAST YEAR? Please click here to see for yourself how our pre-published model trades have performed so far! Seeing is believing!) 

 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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