The Emboldened Bear Is Out in the Open
In our trading plan – published on Wed, 01/12 – we wrote: “Notwithstanding the ensuing rally, that caution (“no bottom-fishing yet”) is still warranted. A forty-year record high inflation is no news to cheer even if it is in-line with expectations. Investors relatively new to the markets need to look up Greenspan’s “Irrational Exuberance” fame!”, with a headline titled “Relief (‘The Sky Is Not Falling’) Rally or Bull Trap?”.
The price action on the markets since then appears to be confirming that Wednesday could be another interim top and a bull trap. As we wrote last week, the market rout could just be starting this week, and today’s pre-market action indicates to that possibility. This is NOT a bear market, but the bull market is clearly ending and the bulls need to take a breather for some time.
Positional Trading Models: Our positional models went short last Thursday – on a close below 4700 – at the daily close of 4659.06 with no stops. Models indicate carrying the short into the close today.
Intraday/Aggressive Models indicate the trading plans below for today:
Trading Plans for TUE 01/18:
Aggressive Intraday Models: For today, our aggressive intraday models indicate going long on a break above 4664 or 4603 with a 7-point trailing stop, and going short on a break below 4615, 4630, 4639, or 4598 with a 9-point trailing stop.
Models indicate short exits on a break above 4620 or 4634. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 09:37 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 convention).
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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