Preliminary sell again

I had said i would update if there's any change in the trend resumption scenario. As i said in my last post, we resumed the trend upwards, but today we had a momentum failure near the highs. Momentum failure in itself is not a sell signal. It can just cause a high level consolidation before the move up. But when some key EMAs crossover along with momentum sell, it suggests that the correction can be something more than just high level consolidation.

For instance, today we not only had a momentum failure but the 3/13 ema pair on 30-min crossed over as well. That suggested that the downmove was going to be something more than just a high level consolidation. Even that EMA crossover is not an indicator of trend change until we make lower lows on the price. So if one is shorting against the trend, as i said in one of my posts 2 days back, either the DTL or the pivot has to be honored. In this case the pivot is at 1211 and any move above that is a signal to reverse long. If one is a miser on the stops, they could even get out on DTL break on a closing basis or a 3/13 crossover back above. I use pivots to reverse my position though. At the close the 3/13 was in a backkiss configuration on the 30-min charts. Now the big money folks can easily perform a crossover with a gap-up. But will they ?

Bottomline, aggresive traders can go short with the above mentioned precautions, using the preliminary sell. Others can close longs and stay in cash until SPX 1211 is recaptured.

Correction over ?

Odds are about 70% that the correction is over and a slingshot recovery is in progress. One of the cardinal sins of countertrend trading is remaining short when a downtrend line is broken. Yes sometimes, false trendline breaks happen. Those happen once in 3-4 months. If you are betting on such outcome, it's your money We made a divergent bottom on the hourly and broke the DTL. That should be sufficient indication to hop on the long side in a bull trend. Too many are expecting SPX 1225. So odds are we will overshoot it this time. If anything changes in the trend resumption scenario, i will update here.

The trend is still up....

But the warning shots have been fired. This is the 4th VST sell signal fired by my system since the Feb 2010 bottom. This selloff has been the largest fastest decline since the Feb bottom, which means it is likely that this is more than a one day wonder. If the market were to maintain the current trend structure, then it has to perform a slingshot recovery to the uspide. If it's a slingshot recovery, we should see big volume coming at the open with green candles. Barring that, the slower moving averages on the hourly charts will start curling over, leading to a more deeper selloff. If the volume is anemic on any bounce from here, i will start scaling into shorts between the SPX 1195-1205 area. A move above 1214 is required to invlaidate the sell setup.

IT and VST sell signals

The IT run which begun in Feb has produced three VST sell signals on my system. The first sell produced a max profit of 20 points from the sell trigger point. The second sell was good for 8 points and the third sell was even worse. Well, it only goes to reinforce the lows odds nature of countertrend trading.

Low volatility gives a false security of limited upside risk and hence draws the short sellers. And then divergences are too juicy for the countertrend cowboys to ignore. It's not a crime to short an uptrend, provide one follows some simple trend rules.

1) Don't short a divergence unless, it's accompanied by a trendline break or a pivot break.

2) Don't short a momentum crossover like MACD or Stoch, unless accompanied by a trendline break or pivot break.

3) To take it one step further, don't short any kind of sell signal, unless accompanied by price confirmation in the form of a trendline break or pivot break for the given timeframe traded.

4) Even, if the above rules are followed, strong trends can create pseudo trendline/pivot breaks and reverse. So after shorting, draw a downtrendline and get the hell out of your shorts, if the down trendline is broken, and reverse long.

5) Trendline and pivot breaks should be on candle closing basis, to avoid false breaks.

These are simple TA rules that everyone knows, but ignored, carried away with esoteric TA or personal ego. Then they foolishly state that divergences do not work or Oscillators do not work or TA does not work.

As i posted on March 26, a break of SPX 1181 put us back on a buy signal. The IT picture is not showing the necessary loss of momentum to call any sort of top here. But then the market always looks strong at tops. It's this contradiction that "market does not show any signs of top" and "market rarely shows any weakness right at the top" makes it a futile endeavour to pick tops. When a top of any significance occurs, it will be written in BOLD letters. Yes, you may miss the top 1%and the GURU title, by not picking the top. I will update here, when i see either signs or confirmation of an IT top. Until then, enjoy the trend...

SPX sell again ! - 3/26/2010

SPX flipped back to a sell at the close today. This whipsaw between sell-buy-sell typically occurs at key reversal areas. That leads me to beleive that this sell signal will run deeper than most think. My strategy here would be to start scaling into shorts from this level and add on any bounces, with a stop at SPX 1181. A move above 1181 will put us back on a buy signal.

SPX - March 24, 2010

SPX taking out 1170 invalidated the sell signal and puts us back in a buy mode again. This is probably one of the crummiest sell signal in terms of number of points gained, in the recent months. The sell signal was triggerred at 1161 and the best price the signal could attain was 1152.89, which is about 8 points. Typically these hourly signals generate anywhere between 15-50 points. Again just to be clear, i am not talking about the potential trading profits of this signal, but the maximum points acheived by the signal from the point where it was triggered. In fact, this would have been a losing trade, had one played it for a swing trade. The shallow correction that the signal produced says a lot about the strength of the market, from a pure price perspective. So we are back in buy-the-dips mode, until the next hourly sell gets triggered, which i will post here.

$WTIC (OIL) remains on a daily sell signal.

SPX enters a ST sell

Sorry, i was busy with some business matters and could not update the blog for nearly a month. Finally i have some time on my hands and will actively start updating my blog. I will continue to post the hourly buy/sell signals on SPX and Daily buy/sell signals (instead of weekly) on Gold/OIL/Dollar etc. Sorry, the weekly stuff takes too long to generate signals and is not working out for me.


The last time SPX generated a buy signal was at 1056, which i posted here on the blog on Feb 12. On Friday my system generated a hourly sell on SPX at 1161, which i posted on TT at

http://www.traders-talk.com/mb2/index.php?showtopic=117286

Stop for the SPX sell is 1170.


Along with SPX, $WTIC (OIL) also entered a sell at friday close, at 80.97. Stop 83.36


I will try to post updates on signals at the EOD each day, if there's any change to the signal.

Weekly signals - 1/19/2010

Weekly trends

OIL (neutral)
Buy 12/24/2009 USO 38.20 stop 35.22 - Stopped out.


Dollar Index (neutral)
Sell 1/15/2010 USD 77.36 stop 78.78 - Stopped out.

Gold (Buy) - Gold issued a buy signal this week.
Buy 1/19/2010 GLD 109.47 stop 102.28
Buy 1/8/2010 GLD 111.37 stop 105.30 - Stopped out

Bonds (buy)
10 year yields on a buy signal since 11/30

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX - Remains on a buy signal

Weekly signals - 2/12/2010

Weekly trends

My system remains neutral on all the assets. Stay tuned for a fresh signals next week.

OIL (neutral)
Buy 12/24/2009 USO 38.20 stop 35.22 - Stopped out.


Dollar Index (neutral)
Sell 1/15/2010 USD 77.36 stop 78.78 - Stopped out.

Gold (neutral)
Buy 1/8/2010 GLD 111.37 stop 105.30 - Stopped out

Bonds (buy)
10 year yields on a buy signal since 11/30
It's now in a retracement in an uptrend

Disclaimer: All signals are experimental and for entertainment purposes only.


SPX

SPX issued a buy signal this week, with SPX 1056 as the key pivot. Above 1056, the market will remain in a bullish configuration. A break below 1056 will reverse the bias to bearish. Whether this is a countertrend rally or the beginning of a new upleg is unclear at this point. No projections for the rally yet. Enjoy it while it lasts...

Weekly Signals - 2/5/2009

Weekly trends

With that surge in dollar, all of those assets inversely correlated with dollar got stopped out. OIL was the last one to get stopped out this week. My system remains neutral on all these assets until the next buy signal gets generated (or a continuation sell as the case maybe).

OIL
Buy 12/24/2009 USO 38.20 stop 35.22 - Stopped out.


Dollar Index
Sell 1/15/2010 USD 77.36 stop 78.78 - Stopped out.

Gold
Buy 1/8/2010 GLD 111.37 stop 105.30 - Stopped out

Bonds
10 year yields on a buy signal since 11/30
It's now in a retracement in an uptrend

Disclaimer: All signals are experimental and for entertainment purposes only.


SPX

SPX remains in an intermediate term sell. Given the speed at which it came close to the SPX 1030 pivot, there are two possibilities for this 9 month cycle bottom due in March. Either we are going substantially lower than SPX 1030 or we are going to see some volatile bottoming action beween the SPX 1030 - 1105 area over the next 3 weeks. I guess it all depends on how the debt situation in the third world countries of Europe pans out. Trade the volatility until a bottom is carved out. Good luck !

9 month cycle thoughts

On Dec 23 i wrote,

Projection


The current e-wave structure displays a potential triple zig-zag, with two upside targets - SPX 1168 (c=a) and SPX 1215(c=1.618*a). The crest of this last 20-week cycle (of the current 9 month cycle) is due end of January 2010, which is where i expect this market to complete it's e-wave formation. After that, it gets bearish as we plunge into the 9 month cycle bottom sometime in mid-March 2010.

Well, we undershot the time target by a week and price target by about 18 points. As i posted here, break of SPX 1131 pivot was the get-out-of-longs signal. The next 9 month bottom is due mid-March. There should be cyclical pressure until that general timeframe. Of course we will zig-zag up and down into that March bottom. Currently i don't have a technical projection. We need a countertrend bounce after which targets can be arrived at. But an educated guess would be the key weekly pivot at SPX 1030.

The entire web is now buzz with the "End of bear market rally" theme. If the next 9 month cycle low comes above the July 2009 lows, which will maintain the bullish cyclical structure, then another high in the SPX is almost certain. It's too early to have an opinion on that. Will update it when the appropriate time comes.

Good luck !

Weekly signals - Jan 29, 2009

Weekly trends

OIL
Buy 12/24/2009
USO 38.20 stop 35.22

Pullback in a weekly uptrend. Buy signal remains on a slippery slope.


Dollar Index
Sell 1/15/2010 USD 77.36 stop 78.78 - Stopped out.

My system is neutral on dollar right now. It remains on a A-B-C countertrend rally with an uncompleted wave C.

Gold
Buy 1/8/2010 GLD 111.37 stop 105.30 - Stopped out

Bonds
10 year yields on a buy signal since 11/30
It's now in a retracement in an uptrend

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX

SPX violated the dubai panic lows of SPX 1083 which i mentioned last week, now putting it in a intermediate term sell. The next logical test would be the support at the weekly pivot of SPX 1030.

SPX is now in a weekly buy, daily sell and hourly sell. The key bull-bear pivot is now SPX 1100.22. All bounces below SPX 1100.22 should be used to sell short. The selloff will likely end in a selling climax in the coming week.

Good Luck !

Weekly trends - 1/22/2009

Weekly trends

OIL
Buy 12/24/2009
USO 38.20 stop 35.22

Pullback in a weekly uptrend. But, remains on a buy signal.


Dollar Index
Sell 1/15/2010 USD 77.36 stop 78.78 - Stopped out.

The sell signal on Dollar got violated this week by a break above 78.77. I still beleive this week's dollar surge was a wave c of an a-b-c correction, rather than a beginning of a major leg higher. My system is neutral on dollar right now.

Gold
Buy 1/8/2010
GLD 111.37 stop 105.30

No change from last week. But the buy signal is on a very slippery slope right now.

Bonds
10 year yields on a buy signal since 11/30
It's now in a retracement in an uptrend

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX

The dollar surge last week unleashed some violence in many markets. SPX failed to acheive the measured move objective at SPX 1165. 1150 was all she wrote. Violation of SPX 1131 pivot was a close-all-longs signal. Since the SPX has broken the 1131 pivot, the selloff has been very steep without generating any continuation sell or even counter-trend buy signals on the hourly charts. The Key 20-week low pivot at 1085 held this week. If it holds and we generate a buy signal next week, then the ST selloff is over. If SPX 1085 cracks for any reason even by a tick, then the selloff will morph into an intermediate sell, with the next support coming at the weekly pivot at SPX 1030. The coming week should provide more clues....

Weekly trends - 1/15/2010

Weekly trends

OIL
Buy 12/24/2009
USO 38.20 stop 35.22

Last week i said that OIL hitting the weekly bollinger band is usually a place where ST traders typically take profits. But the profit taking was stronger than what i expected. It's now in a retracement in an uptrend, but on a weekly buy nevertheless.

Dollar Index
Sell 1/15/2010
USD 77.36 stop 78.78

Dollar index issued a sell signal this week.

Gold
Buy 1/8/2010
GLD 111.37 stop 105.30

No change from last week.

Bonds
10 year yields on a buy signal since 11/30
It's now in a retracement in an uptrend

Disclaimer: All signals are experimental and for entertainment purposes only.


SPX remains in a weekly and daily uptrend. The selloff after Intel earnings has put pressure on the hourly uptrend, but remains on a buy nevertheless. The SPX 1131 pivot continues to hold any selloffs. If the hourly flips into a sell, i will update here next week.

Weekly signals - Jan 8, 2009

OIL
Buy 12/24/2009
Long USO 38.20 stop 35.22

Oil remains on a buy signal. USO hit it's weekly BB bands which is usually a good spot to take profits. If this market is in a trending mode, we should see the bollinger bands flare up next week.

Dollar
Countertrend buy

Dollar marginally missed a sell signal this week. It remains on a countertrend buy.

Gold
Buy 1/8/2010
GLD 111.37 stop 105.30

Last week, i was looking for a buy on gold and we got a confirmation this week.


Bonds
10 year yields on a buy signal since 11/30
No change from last week

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX remains in a daily and weekly uptrend. We are heading towards the SPX 1165 target with ever decreasing volatiltity. Before excpecting any meaningful correction, we should see the volatility pick-up. Until then all short attempts will be futile. No need to overanalyze here.

Weekly signals - Dec 31, 2009

OIL
Buy 12/24/2009
Long USO 38.20 stop 35.22
No change from last week

Dollar
Countertrend buy
No change from last week. Looking for a sell signal this week

Gold
Countertrend sell
No change from last week. Looking for a buy signal this week

Bonds
10 year yields on a buy signal since 11/30
No change from last week

Disclaimer: All signals are experimental and for entertainment purposes only.


One of the readers question was whether the entry is based on week ending price or opening price next week. For intermediate term positions, it's irrelavent, unless the next week opening happens to be a massive gap-up. But then, many a time, it also gaps-down offering better entry price. I tracks these signals based on end of week closing price basis. To be fair, i will try to post these signals 15 minutes before the closing, end of week, if time permits and does not interfere with my trading activity.

These weekly signals will not be published for the SPX, as the stock market is an entirely different beast, which i will continue to anlalyze seperately. There is no change in SPX outlook. We remain in a daily uptrend from the Dubai lows, pullbacks on hourly charts aside.

Dammit, is it a buy, sell or hold ?

After reading newsletters for many many years, i finally threw up my arms in frustration in 2000, when i started developing my own systems.

A typical newsletter writer's recommendation goes like this "While the dollar index is in a major bottoming formation with overwhelming bearish sentiment, we should be on look out for a buy. But i don't rule out another low sometime next week. Although given the current configuration, a low may not be required and we could just bust out of the gates. A move here can be explosive, but the declining long term moving averages can put pressure on any upmove. The LT direction remains down and so does the ST, but the ST is on the verge of moving up. Caution is urged for shorts. Any move below xx.xx will mean the downtrend continues. Any sustained move above xx.xx would mean the trend has turned up"

My silent response has always been, "Dammit why don't you just tell me if the move is trend or countertrend, and is it a buy or sell. If it's a buy/sell where should be my stop ?". My system development efforts over the years have been focussed on these three things. Although my focus has always been on ST trading on S&P, i have been trying to develop some systems to trade the intermediate term moves on various sectors/commodities. I have posted some random signals on this blog over the years on Dollar, Gold and Bonds, but not on a consistent basis to track their long term performance. I have done some significant work this year, spending countless hours backtetsting them, which looks promising. But then, everything looks promising during the backtesting. The proof of the pudding lies in the real-time testing.

I will post all the signals from my system, during 2010 on Gold, Oil, Bonds and Dollar. All signals will be end-of-week basis. The signals will be based on weekly charts and for multi-month intermediate term moves. Countertrend moves will not be traded.


OIL
Buy 12/24/2009
Long USO 38.20 stop 35.22

Dollar
Countertrend buy

Gold
Countertrend sell

Bonds
10 year yields on a buy signal since 11/30

Disclaimer: All signals are experimental and for entertainment purposes only.

Potential e-wave structure

The current e-wave structure displays a potential triple zig-zag, with two upside targets - SPX 1168 (c=a) and SPX 1215(c=1.618*a). The crest of this last 20-week cycle (of the current 9 month cycle) is due end of January 2010, which is where i expect this market to complete it's e-wave formation. After that, it gets bearish as we plunge into the 9 month cycle bottom sometime in mid-March 2010.

Bears failed !

Bears certainly failed this week to exploit a setup that was presented to them. We had a whole basket of divergences from price momentum divergences to A/D line divergences. And there was the pesky 20-week low due end of November. Not only did the 20 week low turn out to be a non-event, but we also erased the A/D line divergences by breaking out above the Oct highs on the NYSE cumulative A/D line.



The Dubai scare was probably the 20-week low. Or one could also argue that the Nov lows at SPX 1029.38 was the 20 week lows. It's hard to say which one was it, until further price action. Any corrective action here breaking the Dubai lows would mean that the 20-week lows came early in November. Instead if we rally from here holding above Spx 1083.74, then Dubai event was the 20-week low. Either way now we have a bullish cyclical structure with the 9 month lows above the prior 9 month lows and the 20 week lows holding above the prior 9 month lows. Of course there can always be non-cyclical forces causing selloffs. But the key going forward is that the November 1029.38 lows should not be broken for any reason. As long as we continue to hold up above that, the bullish intermediate term rally will continue.

20 week cycle thoughts

Last week i wrote,

The 20-week low is still ahead of us, due end of November, as i mentioned in my last post. If the above mentioned negatives play out, we should see a severe decline starting next week. Where the decline stops, will determine the next phase of the bull or bear market, as the case maybe. If SPX 1030 cracks, then that is all she wrote for this mini-bull run....

Well, this whole Dubai news causing this worldwide selloff is a joke. When did Dubai become the economic center of the world? Since the bulls pushed the envelope to the far end of the 20 week cycle, there was little time left for an orderly decline to occur. Hence we are seeing this ugly 1-day mini-crash type of event occuring as we speak in the S&P futures. Given the nose bleed momentum, it's unlikely any bottom will occur on friday. The bottom should likely come on Monday, Nov 30, which should coincide with the 20 week lows.

Now if this 20 week lows happen to be a trend turning event, then we should see the SPX 1030 swing lows taken out, like a hot knife going thru butter. If not, this will have bullish implications. An important cycle low like the 20-week, occuring above the prior swing low and mainting the existing bullish trend structure, can only be bullish. I will reserve my opinion here until next week, to see where the 20 week cycle bottoms, before calling this an important top.