Traders' A.I.

Friday’s action in S&P 500 stayed above our often-mentioned key level of 2760 and confirmed the dominance of the bulls on the market – or, the lack of dominance of the bears on the market. Considering the North Korea summit tomorrow, it might be prudent to wait to establish any new positions today. Intraday, aggressive traders may want to be careful getting stuck in an overnight position – if engaging in such trading, better to end the day flat.

Model Biases/Outlook:

Both the medium-term and short-term models indicate strong bullish bias, albeit with some caution to confirm the key levels (2790-2760-2740) before initating fresh new buying. As per the medium-term forecast published Wednesday night, “medium-term models now indicate switching to a slight bearish bias if the index falls below 2740 on a daily close basis.”. 

Medium-to-long term Models indicate staying bullish above 2760, flat between 2760 and 2740, and bearish below 2740. 

The models indicate no short bias until at least a daily close below 2740 (slightly bearish) or below 2735 (outright bearish). Models indicate staying flat (no positions) between 2760-35. 

Medium term models indicate staying FLAT (NO positions) at least until the close of Tuesday’s regular session – owing to the heightened geopolitical risk of tomorrow’s summit and the expected volatile spikes in both directions surrounding the potential trickling down of the news headlines throughout the session – pre and post regular hours. 

Aggressive, those who followed our intraday models would have traded only from the long side on Monday, according to the trading plan which indicated trading from the long side above 2790 and from the short side below 2765. Depending on the individual risk appetite and the stop/target levels used, they would have made some small profits/losses for the day OR still holding onto a long position into the Tuesday.

For Tuesday, the models indicate potential false spikes all the way to test 2795-2800 band and 2760-2745 band, and hence extreme caution is advised when trading tomorrow on an intraday basis. Unless you are going to use extremely tight stops/targets and are very nimble to react to any potential spikes in and out, it might be best to stay out of aggressive, intraday trading on Tuesday!

If you MUST trade (compulsive/addicted trader? Or, professional, medium frequency, intraday trader with deep capital and deploying small portion of it to dip the toes in?), aggressive models indicate trading from the long side while above 2780 and from the short side while below 2760 and stay flat between that range. Use tight stops when buying long or selling short to avoid getting trapped into a swiftly losing position. Be wary of potential volatility around the geopolitical headline risks involving the North Korea summit tomorrow.

Yes, there may be some people who might make some cool trades tomorrow amidst volatile markets. It may end up being just a quiet market session with no volatility at all. We can not know. And, hence the caution! It might be worth reminding ourselves the wisdom in the words of: “Fools rush in where angels fear to tread”.  Or, in trader lingo, “(don’t be that guy/gal who would be) Picking pennies in front of a (rolling) bulldozer”.