On February 25th, when the S&P500 index was trading at around 1,520′s, we wrote that the short-term market trend would turn to bearish and the setback would most likely test the 1,490 (maybe even further down to 1,450) level. Parallel to our expectations, following the elections in Italy, the market fell sharply on that day, closing at 1,487. Even though the Arbitrage Trader algorithm accurately predicted this mode in advance, the model did not forecast that the market would make up the decline in the following 2 trading sessions during which the market increased to where it stayed the week before. As our clients have noticed, the Arbitrage Trader model reversed its short-term forecast for the generic stock market to buy as of Friday morning:
- Statistical arbitrage model now recommends “buy”. Our Arbitrage Trader model algorithm is signaling a bullish trend in the indices for the coming 10-12 trading days. Even though we are moving only within the 2-3% distance from the all time high for the S&P500, the algorithm currently predicts further upside move. The bottom formation around 1,500 is also supporting further upside for the market.
- Technically, for the S&P500 index, 1,530 will be a key resistance level. Any daily close above this level with significant volume would confirm the bullish trend. For an aggressive trader, we would recommend 1,500 as a key support level or stop level.
In short, we now have a bullish view on the generic market for the coming 10-12 trading days and recommend our clients to buy into weakness in the market. However, we also strongly recommend frequent checks on our app as the overall volatility is now higher in the markets.
The short-term statistical arbitrage model that we use to generate these buy/sell market signals is the same model that we use to power Stock Arbitrage Trader for the iPhone & iPad to generate buy/sell signals for specific stocks. Click here to learn more or download now!