NO BULL, NO BEAR – Markets Waiting for A Directional Bias to Emerge post-Midterm!
While most of the financial media was predicting the usual “post mid-term” rally in the markets due to the potential Washington gridlock due to the split congress, we issued a “Not So Fast” caution last week and continue to reiterate that “indeterminate” bias for today. True to our models’ cautions, the much touted “post-midterm bull market” rally has proved anything but elusive for the last two sessions.
Our models advise caution against getting into the markets on false spikes up. One needs to confirm the moves against key levels to enter into any directional trade for the medium term.
Model Biases/Outlook:
With the mixed action following the midterm results, our models have adopted a cautious, “indeterminate” stand while between 2795 and 2745. This market is likely going to be fraught with bull traps rather than bear traps – be cautious when buying into the spikes while below 2795.
A Brief Trace Back of The Current Bias/Outlook
Thursday, 09/27, our models had negated the previously adopted bullish bias and signaled a neutral bias between 2933 and 2887, which was later updated to 2920 and 2880.
On a break below 2880 on 10/10/18, our models executed the pre-published trading plan to book 142 points in profit on a short position! Our models have since adopted a “cautiously bearish” bias. This caution is in view of potential spikes up in a whipsaw mode.
As of the close on Wed, 10/24, our models turned bearish and continue to stay bearish while the index is below 2710. While within the 2710-2770 band, we reiterated an “indeterminate” bias for the market till 11/07.
As of the close on Wed, 11/07, our models negated the indeterminate bias and adopted a “cautiously bullish” bias. This is flipped back to “indeterminate” bias following the midterm election results action and will remain so while the index is between 2795 and 2745.
Trading Plans for MON, 11/12:
Medium-term/long-term Investors
Following big wins during the volatile deep moves last few weeks, the medium-term models have sat out the markets most of the last week, waiting for the mid terms to be over. They are starting the post-mid-terms new trading week flat and with caution.
Today’s Plan/Forecast: For today, Monday 11/12, our medium-term models indicate going long on a break above 2785, and going short on a break below 2764 during the regular session – with a 10-point trailing stop.
Aggressive, Short-term, Intraday, or Professional Traders
Today’s Plan/Forecast: For today, Monday 11/12, our aggressive intraday models indicate going long on a break above 2785, and going short on a break below 2775 during the regular session – with a 7-point trailing stop.
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:
(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.