The Eminiforecaster tentative forecast for the trading week ending May 1st is now posted.  (click Next Week)

We expect the market to decline for the week starting Monday.  The current forecast is still showing we should continue higher.

This week’s forecast has done quite well aside from Monday where there was bearish news driving the market south. The upward bias has held according to the forecast the rest of the week.   The market does appear to be losing some steam however, which suggests things are in place for a good forecast next week.   The alerts this week have not done as well as anticipated as the alerts are subject to whipsaw where there are sudden trend changes.

The daily ranges have remained somewhat constant at around 20 points per day and the VIX is also flat at or about 37% which translates to just under 20 points as well.  There are plenty of reasons the market could start heading lower again with this kind of complacency.

There is a strong seasonal towards rising into mid June and then declining from there, so the market may have a number of weeks of continued attempts at some upside overall before a new show comes to town that is downward biased though.  Don’t be surprised if it comes a bit early this year though.  The VIX has a much higher than random percent chance of rising (bearish for the market) between now and May 10, but has an overall tendency to decline into very early July.  These factors also line up into the general scheme I am describing above.   From an option pricing perspective, the market also remains in the slight bearish camp as well.

Key levels are 860 and 874 area to the upside. To the downside we see 830 and 822 as key.  These are good areas to plan your risk/reward and stop placement around.  If looking for a short, I always like to see a rally into a reasonable key area. For example, I’d like to be as close as I can to the 865-874 area to short because I can expect my risk to be the difference between my entry and the upper level. So, if I sold at 865 and hit my lower area of 822, I might see 40 points of gain on my 10 points of risk, or a 4:1 ratio.

Manage your risk, and the gains will come (usually when you are not looking) :-)

Wishing you the very best,

Rob Vadim & Staff