Traders' A.I.

Model Biases/Outlook:

Considering that there are no major catalysts on the horizon (as of now) to keep driving the markets up to newer record highs or to push them down beyond the recent range lows, our models indicate a choppy, range-bound trading until the range is broken out of. 

Our medium-term models have negated the recent “slightly bullish” bias and are sporting a neutral bias since Thu, 09/27. No bearish bias in sight until all the way below 2887. On the up side, our medium-term models are looking for a daily close above 2933 to turn outright bullish again.

Aggressive, intraday models indicate the risk to bears in the short term, with the recent drop potentially proving to be a bear trap, unless confirmed otherwise with today’s close! Caution is advised when shorting this market on prematurely declared “end” to the recent bull run!  

A Brief Trace Back of The Current Bias/Outlook

On Friday, 09/07, our models had entered an “indeterminate” state and had negated their previous bullish bias, but had not adapted a bearish bias, yet. After reiterating this indeterminate bias for seven consecutive days, our models adopted a “slightly bullish” bias on Wed 09/19. 

For Mon, 09/24, we continued this bullish bias, with a cautious stand about the gap-up on Thu 09/20. On Monday this gap-fill was attempted by reaching within 0.13 points – our models wanted to see it filled fully and published caution to bulls until that is seen. On Wednesday, 09/26, this gap was filled and the market closed down. 

Thursday, 09/27, our models had negated the bullish bias and are adopting a neutral bias between 2933 and 2887. Despite the rise in the yields and the tight labor markets, and the much touted “sharp drops” in the markets, we reiterate this neutral bias for today, Monday 10/08, for the eleventh day in a row.   

Trading Plans for MON, 10/08:

Medium-term/long-term Investors

The medium-term models have closed out the last position (a long) for a 12-point profit last week, opened at 2913 on Wed, 09/19 and have been flat since then (no positions). 

The medium-term models indicate trading off of a widened range of 2933 and 2887 – would go long on a daily close above 2933 and go short a daily close below 2887 today, Monday 10/08, both sides with a 10-point trailing stop.   

Aggressive, Short-term, Intraday, or Professional Traders

The aggressive, intraday trading plan for Friday – published before the markets opened – stated: “If the index crosses above 2915 during the regular session, the models indicate going long with a 7-point trailing stop; if crossing below 2883, going short with a 5-point (different from the long) trailing stop.“ (click here to read the full forecast and verify this claim)

The index broke below the 2883, triggering our models into a short position with a 5-point trailing stop. The index hit a low of 2869.29 where the trailing stop was taken down to 2874.29. This stop was tripped later in the session, thus closing the short position with a profit of 8.5 points for the day! Yep, another big win, by any standards, for a mechanical system’s trading with predefined entry and exit points on another day where markets went through a wild ride!

For today, our agressive intraday models indicate trading off of the range of 2902-2869. If the index crosses above 2902 during the regular session, the models indicate going long with a 5-point trailing stop; if crossing below 2869, going short with a 7-point (different from the long) 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). 

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.