Race to New Highs or YoYo Day-3?
The overnight S&P 500 Index e-mini futures market is not doing much, other than showing some “profit taking” (?) on yesterday’s strong move. No major news headlines seem to be swirling the markets (at least, not yet, as of 8:30am EDT). No major economic releases scheduled other than the University of Michigan Consumer Confidence Index at 10am EDT.
Models indicate potential consolidation in yesterday’s strong upside move, barring any new catalysts to come in. The options market positioning for expiries later today indicate a large number of call positions at expiries as wide spread as 2895 all the way through 2880, potentially skewing the option-writers’ bias/pressure to the downside.
All in all, no clear bias to either side, indicating a potential drift to consolidation.
Model Biases/Outlook:
Our models continue to sport slightly bullish bias. On the other hand, there is no clear bullish territory in sight until a daily close all the way above 2860. Between 2818 and 2860, it would continue to be in a choppy trading range.
A Brief Trace Back of The Current Bias/Outlook
After 14 consecutive days of bearish bias, our models have negated the bearish bias on last Friday, 07/06/18 when it closed at 2759.82! Since then, our models have been consistently forecasting bullish strength and are yet to flash any concerns about any bears in sight, until Friday, 07/27.
After reiterating the bullish momentum for 21 consecutive days, our models abandoned the bullish bias with the action on last Friday 07/27, but have NOT replaced it with bearish bias yet. We are in this “neither bullish, nor bearish” state until Tue 08/07.
Eight days after the “neutral/indeterminate” bias, our models have resumed the bullish bias as of Tue 08/07. We continue this (slightly) bullish bias for the tenth day today, Fri 08/17, but raise some caution about the bulls losing steam in the wake of geopolitical headlines and the drying up of positive earnings stream due to the end of the earnings season.
Trading Plans for FRI, 08/17:
Medium-term/long-term Investors
Medium term models indicate a slightly bullish state for the S&P 500 Index. The models are currently flat (no positions) and are waiting for a break out to go long.
For today’s regular session, the medium term models indicate going long on a break above the index level of 2860, with a 10-point trailing stop. No bearish bias until all the way below 2820. Meditum-term models indicate waiting for a daily close below 2820 to turn bearish.
Remember that a “trailing stop” works differently from the traditional stop-loss order. Please bear in mind that the trailing stop’s trigger level would keep changing throughout the session (click here to read on the conceptual workings of a trailing-stop).
Aggressive, Short-term, Intraday, or Professional Traders
Intraday aggressive models indicate a “slightly bearish” state for the S&P 500 Index for the day.
For today’s regular session, the intraday aggressive models indicate trading off the 2845-2825 as the pivot band. Above 2845, the models would go long (buy) with a tight trailing stop (about 6 points). Below 2825, models would go short (sell) with a tight trailing stop (about 6 points).
To avoid getting caught up in whipsaws and overtrading, wait for a confirmation of the breakout of these levels on at least a 15/5/1 minute bar or two, depending on your trading style and risk profile.
Remember that a “trailing stop” works differently from the traditional stop-loss order. Please bear in mind that the trailing stop’s trigger level would keep changing throughout the session (click here to read on the conceptual workings of a trailing-stop).
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 recommendat
ion 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.