Day 5: The Slow Grind Taking The Market to New Highs? This Week to Reveal!
The market is within striking distance from the all-time highs recorded in January this year. Yesterday’s market action – where the S&P 500 Index essentially closed flat – is interpreted by our models just as an inevitable consolidation rather than any slowing of the bullish momentum or any concern for the upward momentum, yet.
The index, on Wednesday, closed at 2857.70 – comfortably out of the choppy trading range of 2850-2820. The likely target to take out next is the January high of 2872.87, with not much of meaningful resistance in the way. The only thing that can thwart this journey to another all-time high is potential geopolitical news which may prove highly negative for the markets. Barring any such developments, the next stop for this move appears to be 2873+ in a week or two.
Model Biases/Outlook:
The action of the market on Wednesday indicates consolidation of the bullish action, potentially in preparation for another assault at the January’s record high. There is high probability that the index tests the record high this week, barring any geopolitical developments hurting the bulls.
Our models are now clearly sporting a bullish bias. If the index closes above 2852 this week, then the index is indicated to move to take out the January high of 2872.87. New highs could very well occur within this week as well, barring any negative geopolitical developments. There is no bears in sight, all the way to below 2820.
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 now abandoned the bullish bias with the action on last Friday 07/27, but have NOT replaced it with bearish bias yet. We are 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 continue this bullish bias for the third day today, Thu 08/09.
Trading Plans for THU, 08/09:
Medium-term/long-term Investors
Medium term models indicate a bullish state for the S&P 500 Index. The models are currently flat (no positions) and are waiting for a break out to go long.
For Thursday’s regular session, the medium term models indicate going long on a break above the index level of 2865, with a 10-point trailing stop. No bearish bias until all the way below 2825.
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).
Aggressive, Short-term, Intraday, or Professional Traders
Above 2865, the models would go long (buy) with a tight trailing stop (about 6 points). Below 2848, models would go short (sell) with a tight trailing stop (about 6 points).
For those who wish to follow the trades of the models: To avoid getting caught up in whipsaws and overtrading, wait for a confirmation of the breakout of these levels on at least a 15/5/1 minute bar, depending on your trading style and risk profile.
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.