The Bear Feeding on China’s Economy (hurt by U.S. tariffs) and Getting Stronger

Our models (both the medium-term as well as the aggressive intraday models) closed the year 2018 by booking +112 points in profits on the last day, Monday 12/31, simply by following mechanical trading using the pre-defined entry and exit points as published in our trading plan before the markets opened. This capped an impressive track record (publicly verifiable) of mechanical trading for our models.

The markets are ringing in the New Trading Year 2019 with the story of weakened (much weaker than expected) China’s economy. Those who understand the global nature of today’s U.S. economy wouldn’t be surprised, if they followed the stories on the trade war and the U.S. tariffs – and, it should not be surprising to see the bears getting bolder and stronger in the U.S. stock market.

As pointed to in our December last week’s forecast: dollar cost averaging, and fresh month/year systematic investing flows…there are many structural twists and turns that are going to make the markets continue the roller coaster ride into the next couple of weeks. Sit tight and hold onto the railings – avoid trying to jump in and out, unless you have a clear, mechanical plan in place.

Our models have the following plan for today’s trading/investing decisions:

Trading Plans for WED, 01/:

Medium-term/long-term Models


Today’s Plan/Forecast: For today, Wednesday 01/02, our medium-term models indicate going long on a break above 2505 or 2487, and going short on a break below 2500, or 2470 (which ever might occur during the regular session 9:30am-4:00pm). If going long above 2505 or short below 2470, the trailing stop shall be set at 10-points.

Last Published Trading Plan/Forecast: Our last medium-term forecast stated: “For today, Monday 12/31, our medium-term models indicate going long on a break above 2508 or 2493 or 2483, and going short on a break below 2502, 2498, or 2488 (which ever might occur during the regular session 9:30am-4:00pm). For all entries, the trailing stop shall be set at 10-points” (click here to read the full forecast and/or verify this claim).

Results/Outcome:

Mon 12/31: Booked +56 points in profits on two shorts and two longs.

The index broke below 2502 around 9:50am. The short rode the market all the way down to session lows at 2482.82 registered around 11:32am. On the way up, the short was closed on a break above 2483 (and, a long was opened), for a gain of 19 points.

The long position (opened at 2483) then rode the index move all the way up to 2508.08 by 1:28pm. Then the index moved down, and the long was closed on a break below 2502 by 1:42pm, for a profit of another exactly 19 points (and, a short was opened at 2502).

The second short from 2502 rode the index down to 2487.21 by 2:36pm, and was closed on a break above 2493 by 2:46pm, for a profit of 9 points (and, opening a long at 2493).

The long then rode up to 2502.32 on the index by 3:44pm and was closed on the break below 2502, for a profit of another 9 points. Since the session approached the last 15 minutes, the models remained flat for the rest of the session.

Thus, our medium-term models booked profits of 56 points (+19 +19 +9 +9), following the mechanical pre-defined entry and exit points published before the market opened!

Past results this month:
Our medium-term models started the month of December with indeterminate state and stayed out of the markets throughout the first half of the month.

Mon 12/17: Booked +20 points in profit on a short
Tue 12/18: Booked +9.25 points in profit on a short

Wed 12/19: Booked +26 points in profit on a short
Thu 12/20: Booked +26.5 points in profit on two shorts
Fri 12/21: No trades
Mon 12/24: No trades

Wed 12/26: Booked +14.75 points in profit on a short
Thu 12/27: Long entered at 2455, carried to Friday
Fri 12/28: Booked +28.75 points in profit on a long

Aggressive, Short-term, Intraday, or Professional Traders

Today’s Plan/Forecast: For today, Wednesday 01/02, our aggressive intraday models indicate going long on a break above 2505 or 2487 or 2476, and going short on a break below 2500 or or 2483 or 2472 (which ever might occur during the regular session 9:30am-4:00pm). If going long above 2505 or short below 2472, the trailing stop shall be set at 10-points.

Last Published Trading Plan/Forecast: Our last aggressive intraday models’ forecast stated: “For today, Monday 12/31, our medium-term models indicate going long on a break above 2508 or 2493 or 2483, and going short on a break below 2502, 2498, or 2488 (which ever might occur during the regular session 9:30am-4:00pm). If going long above 2508 or short below 2488, the trailing stop shall be set at 10-points” (click here to read the full forecast and/or verify this claim).

Results/Outcome:

Mon 12/31: Booked +56 points in profits on two shorts and two longs.
The index broke below 2502 around 9:50am. The short rode the market all the way down to session lows at 2482.82 registered around 11:32am. On the way up, the short was closed on a break above

2483 (and, a long was opened), for a gain of 19 points.

The long position (opened at 2483) then rode the index move all the way up to 2508.08 by 1:28pm. Then the index moved down, and the long was closed on a break below 2502 by 1:42pm, for a profit of another exactly 19 points (and, a short was opened at 2502).
The second short from 2502 rode the index down to 2487.21 by 2:36pm, and was closed on a break above 2493 by 2:46pm, for a profit of 9 points (and, opening a long at 2493).
The long then rode up to 2502.32 on the index by 3:44pm and was closed on the break below 2502, for a profit of another 9 points. Since the session approached the last 15 minutes, the models remained flat for the rest of the session.

Thus, the aggressive intraday models booked profits of 56 points (+19 +19 +9 +9), following the mechanical pre-defined entry and exit points published before the market opened!

Past results this month: Our aggressive intraday models mostly stayed out of the market in early December.

Mon 12/10: Booked +31.25 points in profit on two shorts
Tue 12/11: Booked +0.50 points in profit on a long
Wed 12/12: No trades

Thu 12/13: Booked -2.25 points in loss on a short
Fri 12/14: Booked +14.25 points in profit on a short

Mon 12/17: Booked +51.75 points in profit on a short

Tue 12/18: Booked +15.25 points in profit on three shorts
Wed 12/19: Booked +41.00 points in profit on two shorts
Thu 12/20: Booked +26.5 points in profit on two shorts
Fri 12/21: Booked -2.00 points in loss on two shorts
Mon 12/24: Booked +50 points in profit on two shorts
Wed 12/26: Booked +9.25 points in profit on a long
Thu 12/27: Booked +62.00 points in profit on three short trades and one long trade
Friday, 12/28: Booked +10 points on profit one short and two longs

Model Biases/Outlook:

As we reiterated since the midterm elections, “this market is still likely going to be fraught with bull traps rather than bear traps – be cautious when buying into the spikes”.

With the historic and wild move up on Wednesday 12/26, our models now indicate the range of 2535-2485 as the broad levels the market is going to be trading within. For any medium-term directional bias to form, the index has to break out of that range.

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:

(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 any 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.