Traders' A.I.

Model Biases/Outlook:

We stated, for the last five days, in our forecasts: “Models indicate that there is no risk to the current bull run while the index is above 2885″. On Thursday, for the first time since we forecast the bull consolidation, the index closed below the 2885 level – it closed at 2878.05 that day, followed by a lower close at 2871.68 on Friday. 

Thus, our models (both medim-term and aggressive intraday models) have now entered into an “indeterminate” state, until further action around the key levels mentioned below confirm any directional bias. 2886 and 2864 are the next key levels our models are closely monitoring for a daily close.  

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 continued this bullish bias for 30 consecutive days, till Thu 09/06, when the index broke below 2885, a level that our models have been indicating as key for the next directional bias. 

On Friday, 09/07, our models have entered an “indeterminate” state and have negated the bullish bias, but have not adapted a bearish bias, yet. The market action and the close today, Monday, 09/10 will be the key for our models to determinate the next directional bias in the market.  

Trading Plans for FRI, 09/07:

Medium-term/long-term Investors

(this trading plan for the medium-term/long-term investors builds upon the strategy adapted since Tuesday, 08/28 and is the same as that published for Friday, 09/07)

For today, medium term models negate the bullish state for the S&P 500 Index, mainly driven by the close below the key level of 2885 that they have been monitoring since 08/31.

For today’s regular session, the medium term models indicate an “indeterminate” bias and waiting to monitor the daily close today. Thus, the medium term models are going to stay flat and out of the markets until the end of the session today, Monday, 09/10. 

(To avoid getting whipsawed, wait for a confirmation of close below this level on a 4-hourly or hourlychart, depending on your trading style and risk appetite)  

Note 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

After closing a 10-point bagger short position opened and closed on Thursday, intraday aggressive models are currently flat (on Friday, the market tested the lower bound indicated by our intraday models at 2865 (market low registered at 2864.12 – just under one point below) just for the first three minutes but did not stay there even on a 5-minute bar). 

For today, Monday, 09/10, the intraday models indicate a bearish stand, owing to the recent record highs and the ongoing trade tensions, coupled with the index’s break below the models’ key level for the last two sessions. 

For today’s regular session – considering the potential inflection point the market could be testing – models indicate trading off of a rather wide trading range of 2886-2862 intraday. The models would go long on a break above 2886, and go short below 2862 – both with an 7-point trailing stop. 

To avoid getting whipsawed, ignore at least the first 10 minutes of market action, and wait for a confirmation of close below the key levels on a 60-min, 30-min, 15-min or lower granularity chart, depending on your trading style and risk appetite.  

If a position is opened and later the trailing stop is hit, then the models indicate staying flat for the rest of the session. 

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 notice to anyone.