Monthly Archives: May 2012

Buy SPX 05-14-2012

TACTICAL SUPPORT IN PLACE: CHANGING OUR MARKET DIRECTION TO BUY

On May 11th, our statistical arbitrage model reiterated its sell signal for the S&P500 index. While the market behaved parallel to our expectations on Friday and so far today (Monday 14th), our most current statistical signals actually start to indicate a bounceback from current levels, mainly 1,340, for the S&P500 index:

  • Statistical arbitrage is now starting to signal buy. We are changing our recent view from further sell-off to buy as our mathematical model started to suggest that some major statistical indicators in our proprietery model do not show enough widening for further downwards moves. Additionally, our model currently does not signal enough dispersion in correlation matrixes, a typical behavior in times of panic and big sell-offs.
  • Technically, for the S&P500 index, levels around 1,340 seem to be holding pretty well as a key, interim support level. While we earlier predicted that 1,292 is a level we might likely see during the second half of May, current market behavior actually indicates an upwards move.

Given the critical and continuously updated news flow coming from the EU (e.g., Greece crisis) and increased volatility in markets fueled by sharp decreases in the EUR/USD exchange rate, our expectations for an upward bounce back may again be a short-lived. So, we recommend our clients to remain very cautious when entering the market.

Get this market direction change instantly through your iPhone or iPad with Stock Arbitrage Trader. Learn more about Stock Arbitrage Trader.

Reiterate Sell SPX 05-10-2012

REITERATING OUR SELL SIGNAL FOR 2 MORE WEEKS

Parallel to our May 3rd predictions, S&P500 index had a setback to 1,350 levels. Our statistical model forecasts more declines in the indexes. Even though, today, the market has started with a small rally, we think this reaction should be used to sell existing longs and even open some new short positions. In other words, the market upward move today should not fake our clients. Starting from Friday 11th, we expect a 10-day long bearish trend in the market:

  • Statistical arbitrage continues to signal sell for the coming 10 trading days. Today, we will likely see some short covering and even maybe a small rally. However, according to our statistical model, the next 10-trading days (through May 25th) we will see a bearish trend in the market.
  • Technically, we already hit our first target level of 1,350. However, we still believe that – given the uncertainty on the EU front and mixed economic data coming from all over the world – S&P500 might decline to 1,292 levels. For longer-term investors or long-only traders we do not recommend entering the market until May 28th, at which point the market might start to buy in some potentially good forthcoming news, including a potential QE3 from the Fed or a more settled atmosphere from the EU.

In summary, we reiterate our bearish view for next 2 weeks. We highly recommend you to remain cautious to early reactions in the market, as it may lead to fake rallies or breaks.

Get this market direction change instantly through your iPhone or iPad with Stock Arbitrage Trader. Learn more about Stock Arbitrage Trader.

1 2  Scroll to top