Traders' A.I.

Model Biases/Outlook:

The nature and the quality of the S&P 500 Index’s breakout to new high this week has been a bit underwhelming and the current stream of geopolitical news headlines is yet to be reflected strongly in the market sentiment.

Our models indicate that there has been no big harm or impetus to the current bull run while the index is between 2875 and 2835. A daily close above 2870 is needed – and, needed fast – for the current bull run to maintain momentum. If today’s close falls below 2850, it could be a harbinger of the lurking bear to emerge soon. 

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 were 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 seventeenth day today.

Trading Plans for FRI, 08/24:

Medium-term/long-term Investors

Medium term models indicate an “indeterminate” state for the S&P 500 Index, mainly due to the significant newsflow and historic market action this week. The models are currently flat (no positions) and are waiting for a deeper break out in either direction.

For today’s regular session, the medium term models indicate a “hold” bias. Models indicate going long only after a daily close above 2870 or an intraday break out above 2875. No bearish bias until all the way below 2835. Models indicate waiting for a daily close below 2835 to turn bearish. If the index breaks below 2825 today, then the models indicate going short with an 8-point trailing stop.

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 an “indeterminate” state for the S&P 500 Index for today. This week, the models closed the long position bought on Friday at 2845.25 with the 6-point trailing stop triggering at 2868 on Tuesday, thus taking a 23-point profit. In the wake of the significant newsflow this week and the necessary time needed for the markets to digest the flow, ingest it into the sentiment and reflect that sentiment in prices, we deliberately have widened the breakout range for the intraday models. 

For today, Friday, the models would go long above 2876 and go short below 2750 – both with a tight, 6-point trailing stop. If any position is entered into and then hit by a trailing stop, the models would remain flat for the rest of the session. 

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 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.

(vi) All opinions expressed herein are subject to change at any time, without any notic
e to anyone.