Imminent Washington Dysfunction – Freedom or Chaos for Businesses?
With the legislature now split between the Republicans and the Democrats, the certain thing is that there is going to be legislative gridlock and dysfunction in Washington, DC. Lack of forceful and clear legislation has always been a good thing for businesses – generally speaking – and, hence everyone is predicting the usual “post mid-term” rally in the markets.
But…given the key technical levels the markets have been testing, and the confluence of multiple cyclical things at play, our models are waving caution against declaring a bull market ahead, flashing a “not too soon” signal!
The wild moves in the market over the last couple of weeks point to the onset of potential regime change in the markets from the long bullish regime to a bearish one! 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.
The rest of this week’s market action would determine which way the potential legislative gridlock could sway the markets, and whether our models would get out of this indeterminate state and adopt a directional bias or not. See below for the details of the key levels our models are monitoring for further action in the short and medium terms.
Model Biases/Outlook:
With the strong close above the 2770 level, our models adopted a cautiously bullish bias and remain so while the index is above 2770. This market is likely going to be fraught with bull traps rather than bear traps – be cautious when buying into the spikes while below 2770.
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.
Trading Plans for THU, 11/08:
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 this week so far, waiting for the mid terms to be over. They are starting the post-mid-terms day flat (no positions) and with caution.
Last Published Trading Plan/Forecast: “For today, Wednesday 11/07, our medium-term models indicate going short on a break below 2715 during the regular session – with a 10-point trailing stop. No long trade indicated until a daily close above 2773 is registered“.
The Outcome: The index closed comfortably above the 2773 level on the daily close basis and have pushed the models into a bullish mode.
Today’s Plan/Forecast: For today, Thursday 11/08, our medium-term models indicate going long on a break above 2855, and going short on a break below 2775 during the regular session – with a 10-point trailing stop.
Aggressive, Short-term, Intraday, or Professional Traders
Last Published Trading Plan/Forecast: “For today, Wednesday 11/07, our aggressive intraday models indicate going short on a break below 2750 during regular session hours, and going long on a break above 2773 during regular session hours, both with a 6-point trailing stop“.
The Outcome: The index opened above the 2773 level and never went below it, thus never breaking above that level during the regular session. Thus, the aggressive intraday models remained flat.
Today’s Plan/Forecast: For today, Thursday 11/08, our aggressive intraday models indicate going long on a break above 2852, and going short below 2830 level during regular session hours, both with a 8-point trailing stop. If a position is opened and the trailing stop closes it, then the models would stay flat for the rest of the session.
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 ba
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