If Your Stomach Churns, You Should Avoid Rollercoaster Rides!
The wild and swift spikes up and down and up, the year-end window dressing, tax-loss harvesting, dollar cost averaging, and fresh month/year systematic investing flows…there are many structural twists and turns that are going to make the markets continue the roller coaster ride into the next couple of weeks. Sit tight and hold onto the railings – avoid trying to jump in and out!
Trading Plans for FRI, 12/28:
Medium-term/long-term Models
Today’s Plan/Forecast: For today, Friday 12/28, our medium-term models indicate adjuting yesterday’s open long position’s trailing stop to 15-points at today’s open. If the stop is hit, the models would stay flat for the rest of the day.
Last Published Trading Plan/Forecast: Our last medium-term forecast stated: “Models indicate going long on a break above 2455 level with a 10-point trailing stop, and going short on a break below 2395 with a 12-point trailing stop. The models also indicate an alternative trading plan which indicates going short on a break below 2450 from above with a 12-point trailing stop, and going long on a break above 2410 from below with a 10-point trailing stop” (click here to read the full forecast and/or verify this claim).
Results/Outcome:
Thu 12/27: Long entered at 2455, open
The index tested our lower bound by coming under three points closer before rebounding higher. The 2455 was broken above around 3:35pm, triggering a long with a 10-point trailing stop. Within the next ten minutes, the index reached an interim high of 2479.02, taking the trailing stop trigger to 2469 (using the nearest 0.25) which survived the 2469.16 reached at 3:52pm.
The models are carrying the long into today’s regular session, with the trailing stop now changed to 15-points from the regular session’s opening.
Past results this month:
Our medium-term models started the month of December with indeterminate state and stayed out of the markets throughout the first half of the month.
Mon 12/17: Booked +20 points in profit on a short
Tue 12/18: Booked +9.25 points in profit on a short
Fri 12/21: No trades
Mon 12/24: No trades
Wed 12/26: Booked +14.75 points in profit on a short
Aggressive, Short-term, Intraday, or Professional Traders
Today’s Plan/Forecast: For today, Friday 12/28, our aggressive, intraday models indicate going short on a break below 2480 with an 8-point trailing stop, and going long on a break above 2490 with a 10-point trailing stop. The models also point to an alternative trade of going long on a break above 2510 with a 10-point trailing stop.
For the trades to trigger, the breaks should occur during the regular session hours (9:30am-4:00pm EST).
Last Published Trading Plan/Forecast: Our last aggressive intraday models’ forecast stated: “For today, Thursday 12/27, our aggressive, intraday models indicate going short on a break below 2420 with an 8-point trailing stop, and going long on a break above 2445 with a 10-point trailing stop. The models also point to an alternative plan as the flip of the last one: going long on a break above 2420 and going short on a break below 2445 (basically, using the 2420 and 2445 levels as the pivot points for trades)” (click here to read the full forecast and/or verify this claim).
Thu 12/27: Booked +62.00 points in profit on three short trades and one long trade
The index broke below the 2420 level around 10:18am, triggering a short with 8-point trailing stop. By 10:20am, the index reached an interim low of 2415.37, taking the trailing stop to 2423.50 (using nearest 0.25). This stop was hit in the next ten minutes, closing the short with a loss of 3.5 points.
The index broke below the 2420 level a second time around 11:06am, triggering another short position. Within the next ten minutes, the trailing stop was hit at 2427.50, with a loss of 7.5 points.
The 2420 level was broken below a third time around 12:32pm, triggering another short position. This short survived all the way to the interim low of 2399.32 registered around 2:16pm, taking the trailing stop to 2407.50. This stop was hit around 2:38pm, closing the short with a profit of 12.50 points.
The index then began the spike up, triggering our “break above 2420” strategy. The index broke above 2420 around 2:50pm, triggering a long position with a 10-point trailing stop. This trailing stop survived through the end of the session and the intraday models closed out the long position at 3:59pm, at 2480.50, for a profit of 60.50 points!
Thus, the aggressive intraday models closed the day with a net profit of 62 points (-3.50 -7.50 +12.50 +60.50). Not bad for a mechanical trading plan in a roller coaster market session! You all have a great weekend!
Past results this month: Our aggressive intraday models mostl
y stayed out of the market in early December.
Tue 12/11: Booked +0.50 points in profit on a long
Wed 12/12: No trades
Fri 12/14: Booked +14.25 points in profit on a short
Mon 12/17: Booked +51.75 points in profit on a short
Thu 12/20: Booked +26.5 points in profit on two shorts
Mon 12/24: Booked +50 points in profit on two shorts
Wed 12/26: Booked +9.25 points in profit on a long
Model Biases/Outlook:
As we reiterated since the midterm elections, “this market is still likely going to be fraught with bull traps rather than bear traps – be cautious when buying into the spikes”.
With the historic and wild move up on Wednesday 12/26, our models now indicate the range of 2350-2485 as the broad levels the market is going to be trading within. For any medium-term directional bias to form, the index has to break out of that range.
IMPORTANT RISK DISCLOSURES AND NOTICES – READ CAREFULLY:
(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.