Stay Patient and Be Safe – Don’t Play with Choppy Markets
Our models have declared “neutral bias” last week and continue to sport it until the indicated range is broken out of. Yields, so far, have failed to prove to be the major catalyst needed to push the markets out of this range decisively. Despite the headlines on multiple fronts throughout the last week, the index mostly closed within the range we are monitoring. Our models are indicating that this choppiness will continue until yields or earnings or some other major catalyst helps the index break out of the range.
Model Biases/Outlook:
Considering that there are no major catalysts on the horizon (as of now) to keep driving the markets up to newer record highs or to push them down beyond the recent range lows, our models indicate a choppy, range-bound trading until the range is broken out of.
Our medium-term models have negated the recent “slightly bullish” bias and are sporting a neutral bias since Thu, 09/27. No bearish bias in sight until a daily close below 2880. On the up side, our medium-term models are looking for a daily close above 2920 to turn outright bullish again.
A Brief Trace Back of The Current Bias/Outlook
On Friday, 09/07, our models had entered an “indeterminate” state and had negated their previous bullish bias, but had not adapted a bearish bias, yet. After reiterating this indeterminate bias for seven consecutive days, our models adopted a “slightly bullish” bias on Wed 09/19.
For Mon, 09/24, we continued this bullish bias, with a cautious stand about the gap-up on Thu 09/20. On Monday this gap-fill was attempted by reaching within 0.13 points – our models wanted to see it filled fully and published caution to bulls until that is seen. On Wednesday, 09/26, this gap was filled and the market closed down.
Thursday, 09/27, our models had negated the bullish bias and adopted a neutral bias between 2933 and 2887, which is now being updated to 2920 and 2880. Despite the rise in the yields and the tight labor markets, and the much touted “sharp drops” in the markets, we reiterate this neutral bias for today, Wednesday 10/10, for the thirteenth day in a row.
Trading Plans for WED, 10/10:
Medium-term/long-term Investors
The medium-term models have closed out the last position (a long) for a 12-point profit last week, opened at 2913 on Wed, 09/19 and have been flat since then (no positions).
The medium-term models indicate trading off of the range of 2920 and 2880 – would go long on a daily close above 2920 and go short a daily close below 2880, both sides with a 10-point trailing stop.
Aggressive, Short-term, Intraday, or Professional Traders
For today, our agressive intraday models indicate trading off of the range of 2886-2876. If the index crosses above 2886 during the regular session, the models indicate going long with a 5-point trailing stop; if crossing below 2876, going short with a 7-point (different from the long) 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).
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.