Traders' A.I.

If all the headline news and the market buzz have you feel that the markets are tanking and you wish you sold all your holdings, you are probably not alone! Nor are you particularly to be blamed for feeling overwhelmingly negative, since we are living in such an information-overload era!

If you step back a little and consider that despite today’s sell-off in the markets, the S&P 500 ended the month with a decent gain of 2.5%+, AND the fact that the index did NOT fall through the strong support band (2710-2700) which we mentioned in our outlook published last night, you hopefully would get a less scarier perspective. We are still NOT in the bear territory but continue to be in the territory of the bulls, albeit weakened bulls.

Tomorrow is Non Farm Payroll Friday (first Friday of the month) and we can expect some fireworks at least during the pre-market session. If you are trading the e-mini futures prior to regular market hours, exercise caution against trying to pick up pennies from in front of a rolling bulldozer – do not get whipsawed in potential spikes surrounding the news releases at 0830am EDT. Let the dust settle and let the market moves become a bit more visible before you take your trading decisions. Do NOT worry about “lost” potential profits – you need not catch every move of the market!

Model Biases/Outlook:

Having fallen back into our repeatedly mentioned strong support band of 2710-2700 today’s market action is interpreted by our models as another consolidation of yesterday’s bullish move. The market continues to rest in the bulls’ territory which it re-entered yesterday.   

Anyone feeling tempted to short sell the market has to note that the market has NOT entered the bears’ territory, even with today’s bearish action following the renewed trade war fears. As mentioned in our intraday alert last week on 5/22, “2680 has to be broken for the models to turn bearish”. That forecast published nine days back still holds true for the medium term models. 

Today’s action – noteworthy in that it pushed the S&P 500 Index below its 100 DMA – keeps the index within the strong support band and “still in bulls’ territory” range of our medium term models. Considering that this is a Friday, and keeping in view the heightened risk for geopolitical drama unfolding over the weekend, medium term models indicate staying flat by the end of the Friday’s session.

As per the INTRADAY update published around 1235pm EDT, the medium term models got stopped out at breakeven (at 2715) and are currently flat. The models indicate no short bias until at least a daily close below 2700 (slightly bearish) or below 2675 (outright bearish). In either case, medium term models indicate staying flat within the 2735-2700 band. 

Those who followed our aggressive, short term models would have had yet another decently profitable day today, by selling the market on a break below 2715 with a profit target of 2708. As published in the INTRADAY Alert at 0145pm EDT, the models exited the intraday shorts as the profit target was reached, and booked decent profits.

While medium term models indicate a cautiously bullish bias, short term/intraday models indicate indeterminate bias while between the 2715-2700 band. Bulls have to push the index into the 2730-35 region and clear above 2740 to keep the bullish move going, failing which would weaken the bulls again. Until then, it would be a choppy trading range with both bulls and bears causing whipsaws.

Aggressive, intraday models indicate trading from the long side while above 2720 and from the short side while below 2705 with tight stops (as small as 5 to 10 points). Stay flat between 2720 and 2705.