Potential Stalemate between the Bulls and Bears! Geopolitical/Macro Event(s) now Hold Sway!
On Friday, the S&P 500 Index broke out of the 2735-45 range that we referred to in the forecasts all last week, 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 confirms the strengh of the bulls in the current market and the weakened bear.
Model Biases/Outlook:
After 14 consecutive days of bearish bias, our models have negated the bearish bias on Friday!
As forecast for Monday (click here for the forecast published Sunday night), the S&P 500 Index continued the move up to test the mentioned 2775-85 region, and actually closed at 2784.17 – within one point from the upper bound the models indicated!
FORECAST: Our forecast for Tuesday – published last night (click here for the full forecast) clearly mentioned: ” the index is likely to test the strong resistance band of 2795-2805, which could prove tough to break out of.”
OUTCOME: ==>> On Tuesday, the index indeed attempted to test this by registering the session’s high at 2795.58!! The fact that the index could barely scratch even one point deep into the predicted strong resistance band is a bit of a concern for the bulls!
FORECAST (for Tuesday – click the link above to cross-check/verify): “If failed to break above, 2780-2770 to act as a strong support below.”
OUTCOME: ==> 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 intraday on Wednesday.
Overall, the models point to a risk of downward consolidation than upside. Caution is indicated when establishing long (buy) positions around the 2795-2805 region, as it could act as a strong resistance. 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 2860, indications are for consolidation towards the 2750-2740 region.
Trading Plans for WED 07/11/2018:
Medium-term/long-term Investors
The medium-term models were long into the close of Tuesday’s regular session – bought at the index level of 2752.50 on Friday. The long positions had a 12-point trailing stop (trigger level set to 2783.58 as of the close of the Tuesday’s regular session). This trailing stop was later hit in the overnight e-mini futures session as the futures market sagged after the news of the Trump administration hitting China with fresh tariffs on goods worth $200 billion.
If you have been following the models and are currently long in a product that trades only during the regular U.S. stock market hours, you would still be holding the long positions and should have the trailing stop’s trigger level automatically adjusted to 2783.58 at the end of the session. IF the index opens below 2783.58 on Wednesday morning, you should be out of the longs at the open and IF opens above 2783.58, you would still be holding the long positions with a trailing stop with a trigger at 2783.58, virtually locking handsome profits for your long positions entered on Friday.
Note: If you are not sure about or just want a refresher on how a “Trailing Stop” works, please click on this educational article to learn more.
Medium term models now indicate an indeterminate bias between 2760 and 2795. Above 2795, bulish bias, and bearish bias below 2760. Tight stops indicated on 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 are now flat, having gotten out of their long position in the overnight futures session with handsome profits – bought at the index level of 2745.50 on Friday and sold through the trailing stop at 2783.58!
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 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.