(Update Wed 10/17/2012 11:30AM EST)
The Score is now 8, and it is likely to drop to 5 (neutral) if SPX closes below 1460 or drops below 1460 tomorrow, and it could even turn bearish if the intraday SOS signal sticks into the close. So, the System could go short at end of day or early tomorrow on a support break. SPX better breakout of 1470-1475 resistance on this attempt or the next one or else it appears we are setting up for another sizable downtrend, and I have a feeling the dip buyers will wait for something much lower than 1430 this time...maybe the 1390s or 1370ish as I proposed weeks ago as a likely bearish target. Good luck
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Current Position: Long at 1442.53
Next Action: Stop at 1451.38
Score (0-10): 10+=Bullish=Trend Score + Turn Score=8+4
The System took 25% profits at 1454 based on 15min indicators. 4-hour candle support has risen to 1451.39. Although the System stop can be placed as much as 1% below that support given the bullish Score, the support is so close to the top that even if SPX drops to 1451 and then climbs back to 1455, we'd only miss out on 4pts when the System would re-enter long and that's much less than the risk on the downside even if all we get is a mild 10-15pt pullback. If SPX can rally to 1460+ and sustain it, the bullish score will stay high. If SPX falls below 1445ish, the score may drop near neutral.
Although this System trade has turned profitable on paper, you know that I was very concerned about the entry point near the top of a range with a neutral score and my concern was justified as SPX re-tested the bottom of the range near 1430 a couple times. This scenario has happened multiple times now and it's very uncomfortable (and widely considered unwise) to enter a position at the boundary of a range before a breakout has occurred. I think the solution is to only enter "neutral" trades (Score=5) that occur near the boundary of a range before a breakout with a 50% position but then add the remaining 50% position if SPX retraces 30%+ of the previous significant pivot which is an idea stolen from the very first version of my system 1+ year ago. If SPX never retraces much, we'll make less profit on a 50% position. If it does retrace a typical 30-70%, we'll make more profit. If it gets stopped out, we will have mitigated our loss. Since most neutral situations lead to choppier SPX action than normal and boundaries typically encounter resistance at least initially, the odds favor the retracement scenario, so I think this System change would lead to more profit and less risk on average. I may institute this change when the next such opportunity arises. It makes tracking trades and the success of the System a slightly bigger pain in the butt, but an occasional 1/2 position trade ain't that bad and we're here to make profits. Good luck.
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