Stock Market and the Economy Now a Political Pinata Disguised as China-Trade-Talks?

On Friday, our models indicated: “With the Non-Farm Payrolls out of the way, China trade talks appear to be the only game left”, with our headline itself highlighting this possibility, and we are indeed seeing it all over the place as we are kick-starting the week (with a clear downside pressure for now)! (click here to verify this claim and/or to read the Friday’s forecast)

Whether the current administration is using the China trade talks as a distraction-play or not, it appears that the China-talks have been popping up as the (political disguised as economic) pinata every time there are murky domestic political issues cropping up…and, it could be used that way for a while to come. 

Has the US Stock Market now become a pinata itself? Depending on which side of the political camps you gravitate into, the answer could differ widely. Which ever side you might fall into, paying attention to this potential factor could lead to some insights/signals that could help with your investment/trading decisions. So, pay attention to this possibility!

In spite of the headlines, investors need to be careful about engaging in knee-jerk trading decisions. As has been indicated here for the last few weeks, extreme caution should be exercised if shorting this market while the S&P 500 Index is above 2910 (updated from the earlier level). A daily close below 2895 (updated from the earlier level) has to be registered for our models to negate the current bullish bias. 


Below, you will find our models’ trading plans for today: 

Trading Plans for MON, 05/06:

(please click here to check the hypothetical trading results of our trading plans published for yesterday and earlier)

NOTE: The index by itself is NOT tradable. The model plans here based on the S&P index level can be used to trade any instrument that tracks the index – the futures on the index (ES, ES-mini), the options on the futures (ES options), the SPX options, the ETF SPY are just a few examples of the instruments one can adapt these plans to. 

These plans are NOT an investment advice to buy or sell any specific securities but are intended to aid – as informational, educational, and research tools – in arriving at your own investment/trading decisions. Always consult a Financial Advisor before making your investment/trading decisions if you are not knowledgeable about these markets.  

Medium-Frequency Models: For today, Monday 05/06, our medium-frequency models are in an indeterminate state and indicate staying out of the market for the day. They would be monitoring today’s close for the below-2895 level. 

Note: For the trades to trigger, the breaks should occur during regular session hours starting at 9:30am ET. By design, these models do NOT open any new positions after 3:45pm. Only one open position at any given time.

Aggressive Intraday Models: For today, Monday 05/06, our aggressive intraday models indicate going long on a break above 2918 with an 8-point trailing stop and a take-profit target of 2928. Models also indicate going short on a break below 2905 or 2900 with an 8-point trailing stop and a take-profit target of 2885. 

Note: For the trades to trigger, the breaks should occur during regular session hours starting at 9:30am ET. Due to the intraday nature of these aggressive models, they indicate closing any open trades at 3:55pm and remaining flat into the session close. Only one open position at any given time. 
NOTE: 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.

(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.