A Bulltrap – or a Recovery – in the Making? Next Two Days’ Market Action and Friday’s Close to Confirm!
With today’s action likely driven by the end-of-month window dressing by money managers, and tomorrow’s action likely driven by the first-of-month flow of funds, the market could be artificially propped up these two days. The sustainability of these two days of moves would be revealed with the market action on Friday! Till that confirms any recovery, our models indicate the continuation of the bearish bias adopted five days back.
Last week’s wild moves in the market point to the onset of potential regime change in the markets from the long bullish regime to a bearish one! Our models advise caution against getting into the markets on false spikes up. One needs to confirm the moves against key levels to enter into more probabilistic trades.
In the mean time, our models continue to churn out winning trade after winning trade in this volatile, choppy markets, with forecasts and trading levels given publicly before the market opens each trading day! On top of the 200+ points profits booked last week, this week the models’ publicly forecast trades have been:
Monday 10/29: +36 points on a short position by the medium-term models’ trading plan; and, +48 points on the short by aggressive intraday models’ trading plan (click here to read the full report and/or to verify this claim).
Tuesday 10/30: +5 points on a short position by the medium-term models’ trading plan; and, +9 points on the short by aggressive intraday models’ trading plan (click here to read the full report and/or to verify this claim).
See below for the details of the outcome of our last trading plans, and the key levels our models are monitoring for further action.
Model Biases/Outlook:
The bearish pressure will continue as long as the index is below the 2710 level and there is no bullish territory in sight until all the way above 2770. This market is likely going to be fraught with bull traps than bear traps – be cautious when buying into the spikes while below 2770.
A Brief Trace Back of The Current Bias/Outlook
Thursday, 09/27, our models had negated the previously adopted bullish bias and signaled a neutral bias between 2933 and 2887, which was later updated to 2920 and 2880.
On a break below 2880 on 10/10/18, our models executed the pre-published trading plan to book 142 points in profit on a short position! Our models have since adopted a “cautiously bearish” bias. This caution is in view of potential spikes up in a whipsaw mode.
As of the close on Wed, 10/24, our models turned bearish and continue to stay bearish while the index is below 2710. Notwithstanding the potential for spikes up, we reiterate this bearish bias for the seventh consecutive day today.
Trading Plans for WED, 10/31:
Medium-term/long-term Investors
Following big wins during the volatile deep moves this month, the medium-term models are currently flat and sporting a bearish bias.
Last Plan/Forecast: Our medium-term models’ trading plan for Tuesday stated: “For today, Tuesday 10/30, our medium-term models indicate going short – again – on a break below 2650 during the regular session – with a 10-point trailing stop” (click here to read the full report and/or to verify this claim).
Last Plan/Forecast’s Performance: On Tuesday, the index broke below the 2650 level around 1030am EST. Consequently, our medium-term models opened a short position at the 2650 level on the index, with a 10-point trailing stop as per the published plan. The session next reached a low of 2644.18 around 1pm EST, and the trailing stop was anchored at 2654.18 which was later hit, closing the short for a 5 point profit! The models remained flat for the rest of the session.
Today’s Plan/Forecast: For today, Wednesday 10/31, our medium-term models indicate going short on a break below 2665 during the regular session – with a 10-point trailing stop. No long trade indicated until all the way above 2770. Models indicate caution against jumping into a long trade on potential false spikes up.
Aggressive, Short-term, Intraday, or Professional Traders
Last Plan/Forecast’s Performance: On Tuesday, the index reliably broke below the 2660 level by 1035am EST, thus triggering a short position with a 6-point trailing stop, at the 2660 level on the index. The index then reached a low of 2646.44 pulling the trailing stop to 2650.44 which was later hit around 10:47am EST, closing the short for a 9 point profit! The models remained flat for the rest of the session.
Today’s Plan/Forecast: For today, Wednesday 10/31, our aggressive intraday models indicate going long on a break above 2708 and going short on a break below 2680, during regular session hours, with a 6-point trailing stop. If a position is opened and the trailing stop closes it, then the models would stay flat for the rest of the session.
NOTE: Remember that a “trailing stop” works differently from the traditional s
top-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:
(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.