Trade War Concerns Not Able to Dent the Bull Spirit! What Can, if Any?
On Friday 07/06/18, the S&P 500 Index broke out of the 2735-45 range that we referred to in the forecasts all that week long, and triggered long (bought) positions by both our Medium-term and Intraday/Aggressive models, as alerted to in our Intraday Alert published on Friday afternoon (click here for the full report). This action confirmed the strengh of the bulls in the current market and the weakened bear.
In spite of multiple alarms about geopolitical concerns and increasingly aggressive trade war rhetoric, the bull spirit did not get dented much, and as of today, Wednesday 07/11/18 – following a rather alarming escalation of the trade war with the announcement by the Trump administration about imposing tariffs on an additional $200 billion worth of Chinese goods – the S&P 500 index lost just 0.71% and closed at 2774.02…way high above the 2735-45 range our models referred to all last week. This speaks to the strength of the current bullish momentum and it takes a daily close at least below 2750 for it to be negated.
Model Biases/Outlook:
After 14 consecutive days of bearish bias, our models have negated the bearish bias on Friday! Since then, our models have been consistently forecasting bullish strength and are yet to flash any concerns about any bears in sight.
FORECAST: Our forecast for Wednesday – published last night (click here for the full forecast) clearly mentioned:
(i) “Overall, the models point to a risk of downward consolidation than upside”
(ii) “Our Models are interpreting today’s market action as a failure, and predict the index to test the 2780-2770 band before further direction could develop”
OUTCOMES: ==>> On Wednesday, the market action confirmed the above two forecast points:
(i) The S&P 500 Index closed 19.82 points lower (down 0.71%) – just a consolidation downward rather than any big downside/bearish move. This is especially noteworthy in the face of the escalation of the trade war with the new tariffs on $200 billion worth of Chinese goods.
(ii) The index indeed tested the 2780-2770 band indicated by the models – S&P 500 reached a session low of 2070.77 (yes, just under one point from the model’s lower bound). Further, the index closed at 2774.02 – right within the forecast band!
For Thursday, the models point to a continuation of the bull consolidation. Indications are for a choppy range-bound trading while the index is within the 2765-2805 range. If the index manages to break above 2805 in a meaningful way, then the bullish move would continue towards the 2870 region; if broken below 2865, indications are for consolidation towards the 2750-2740 region.
Trading Plans for THU 07/12/2018:
Medium-term/long-term Investors
The medium-term models stayed out of the market on Wednesday, waiting for the index to break out of the 2760-2795 band.
For Thursday, medium-term models indicate an indeterminate bias between 2760 and 2795. Above 2795, bulish bias, and bearish bias below 2760. Tight stops indicated in both the directions. If long and the index touches 2804, place a 10-point trailing stop and let the position run or let the stop hit.
Aggressive, Short-term, Intraday, or Professional Traders
The short-term/Intraday/Agressive models stayed out of the market on Wednesday, waiting for the index to break out of the 2760-2790 band.
For Thursday, the models indicate an indeterminate bias between 2765 and 2785. Above 2785, bullish bias, and below 2765 bearish bias. Models to stay flat between these levels. Indications are to use very tight stops on both sides (around 10 points, depending on your trading style and risk appetite).
IMPORTANT NOTICES & DISCLAIMERS – 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 an
y 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.