Another Bull Trap Goes on the Record!
In the morning of Thu, 04/21, when the markets were upbeat and most analysts were pumping the markets with the “inflation is peaking” narrative, we wrote this in our trading plans: “the levels our positional trading models indicated (4495-4517) are likely coming into play today and in the next couple of days. Whether the index can break out of 4517 or fall back below 4495 will determine the next directional leg for the near term”. We also added: “Bulls need to be cautious about a potential bull trap within this range. Unless the Fed indicates any unexpected dovish tone, the markets could be setting up for another leg down”.
(After the fact, everybody says “I told you so!” without really any record of them saying so. Our publication of these statements/forecasts can be verified – with timestamps – on third-party platforms such as Facebook and LinkedIn)
Later that day, the index reached an intraday high of 4512.94 (just about four points away from the top of our bull trap range) before starting to melt down. Our models indicate that this meltdown is NOT done yet, and that there could be more pain coming to the bulls. Our positional models will avoid going long while the index is below 4320 on a daily close basis.
Positional Trading Models: Our positional trading models are currently sporting a bearish bias. A daily close above 4320 will turn the models neutral.
Intraday/Aggressive Models indicate the trading plans below for today:
Trading Plans for TUE 04/26:
Aggressive Intraday Models: For today, our aggressive intraday models indicate going long on a break above 4303 or 4285 with a 9-point trailing stop, and going short on a break below 4294, 4270, or 4245 with a 9-point trailing stop.
Models indicate long exits on a break below 4300 and 4278, and short exits on a break above 4237. They also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 10:31am 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.
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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