Yet Another Bull Trap Called!
While the TV talking heads were all telling you to buy into the post-Fed rally, we published our trading plans last Thursday morning with CAUTION as the theme. The index gave up more than 200 points (around 5%) since then, and our models escaped the rout unscathed! We thank our loyal readers who sent their appreciation, and we are glad that we could be of some assistance to traders in navigating these turbulent market gyrations.
Our trading plans published on Thu., 05/05, stated: “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”. That spike to 4307.66 last Wednesday proved to be yet another trap for the bulls as we all know now. And, that 4050 was NOT the low but we saw another low around 3975 yesterday. Bulls are cautioned to be nimble and not get too caught up in any spikes up from yesterday’s lows.
Positional Trading Models: Our positional trading models are NOT convinced that we have seen the bottom yet, but they indicate a likely small bounce from yesterday’s lows. Models indicate going short on a spike up to and a break below 4085 on a daily close basis. No bullish bias indicated while the index is below 4135.
Intraday/Aggressive Models indicate the trading plans below for today:
Trading Plans for TUE 05/10:
Aggressive Intraday Models: For today, our aggressive intraday models indicate going long on a break above 4038, 4028, 4003, or 3984 with a 9-point trailing stop, and going short on a break below 4009, 3997, or 3974 with a 10-point trailing stop.
Models indicate short exits on a break above 4014. They also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 09:32am 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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