Court Verdict, Guilty Plea and Implication, Raucous Rally, Fed Minutes…Enough to Spook the Markets?


Our forecast of imminent new record highs has come true on Day 2 – yesterday – with the S&P 500 Index registering a new high of 2873.23. But, with the domestic political temperatures weathering(?), what otherwise could be a tsunami, with the Manafort and Cohen news, with Trump appearing(almost) to have dodged it with a raucous election rally, and with today’s release of the FOMC Meeting Minutes…the financial markets have a lot to process today, Wednesday 08/22/18! 


There is every possibility for a trader/investor to get prematurely swayed by news headlines about imminent market crash or cruise – caution is advised against knee-jerk conclusions about market reaction to these news headlines until at least a few hours into today’s regular session and at least an hour after the Fed minutes, which means until after 3pm.   

Model Biases/Outlook:


On Tuesday, the S&P 500 Index closed just about 3 points above the 2860 level our medium-term models indicated to go long. Nevertheless, the nature and the quality of the breakout has been a bit underwhelming and the current stream of political news headlines is yet to be reflected in the market sentiment.

Consequently, our models are currently ignoring the technical breakout and waiting to see today’s market action to form a directional bias.

Nevertheless, our models indicate that there is no big harm to the current bull run while the index is above 2830, and that there is no bearish territory in sight until a daily close below 2830. 


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 abandoned the bullish bias with the action on last Friday 07/27, but have NOT replaced it with bearish bias yet. We were 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 (slightly) bullish bias for the fifteenth day today.


Trading Plans for WED, 08/22:


Medium-term/long-term Investors


Medium term models indicate an “indeterminate” state for the S&P 500 Index, mainly due to the significant newsflow since yesterday’s close of the regular session. The models are currently flat (no positions) and are waiting for a deeper break out in either direction as we suspended the technical buy signal above 2860 yesterday.

For today’s regular session, the medium term models indicate a “hold” bias. No bearish bias until all the way below 2830. Models indicate waiting for a daily close below 2830 to turn bearish. If the index breaks below 2825 today, then the models indicate going short with an 8-point trailing stop.

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


Intraday aggressive models indicate an “indeterminate” state for the S&P 500 Index for today. The models closed the long position bought on Friday at 2845.25 with the 6-point trailing stop triggering at 2868 yesterday, thus taking a 23-point profit. 

In the wake of the significant newsflow today and the necessary time needed for the markets to digest the flow, ingest it into the sentiment and reflect the sentiment, we deliberately have widened the range to lookout for the intraday models. 

For today, Wednesday, the models would go long above 2876 and go short below 2740 – both with a tight, 6-point trailing stop. If any position is entered into and then hit by a trailing stop, the models would remain flat for the rest of the session. 

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 or two, 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:

(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.