Current SPX Position: Short at 1646.69
Next Action: Stop and go long at 1599.20
System Score: 5=Neutral=Trend Score + Turn Score=3+2
Proposed New Score: 46%=Neutral=Trend Score + Turn Score=12+34
The Score is now officially neutral, so the System will go long if 4hr resistance is broken at 1599. The initial 1575ish target was reached. I think a lower low is possible Monday, but a 2-4 day rally is likely imminent and 1530-1550 will likely wait 1-2 weeks. A Fib
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(Update ~3PM EST)
The Score is amazingly stubborn. One of my indicators is almost overbought now, so the Score is likely to end up somewhere between 3 and 5 depending on how things finish. Obviously, a Score of 3 or 4 would still be bearish, so it's possible today's action (even with the lower low) is just part of a complex sideways wave 4 with one more spike lower into Monday morning. Unless SPX dives hard, it sure appears the next 20pt+ rally will lead to a very bearish setup again. If SPX breaks upward out of a reverse H&S pattern, 1600-1620 have plenty of resistance points, because we have the 1597, 1598 and 1608 pivots as well as the 50dSMA, 1618ish breakdown area and H&S target at 1610ish. I am tempted to move the stop up as allowed when the Score is still bearish, but weekend risk/reward is big and we have large paper profits so I will leave it alone at 1599. Good fortune.
Thank you for timely mid-day update.
ReplyDeleteJust for curious, the other night I checked each trade listed in your Trade History table to see whether daily trend has any impact to the winning odds and gain. I used MACD (12, 26, 9) signal line cross over as daily trend change signal. I am sure you can have better indicators to signal daily trend change. Following are what I found:
1. There are 26 trades in sync with daily trend when the trades were taken. 16 winners, 10 losers, and 223 points gain.
2. There were 24 trades against daily trend, 13 winners, 11 losers, and 76 points gain.
3. There were 7 trades were taken right when daily trend were turning (hard for me to judge, especial in midnight, when my eyes were blurry), 4 winner, 3 losers, and 27 points gain.
Seems when trade is taken in the same direction with daily trend gets better winning odd. But that would have missed out the 76 points gains. So it might dependents on personal risk tolerance for taking trade against daily trend or not.
I also compared winning odd and gains among trades took in 2012 and 2013. In 2012, there were 24 total trades, 13 winners, 11 losers, and 79 points gain. In 2013, there were 33 trades, 20 winners, and 247 points gain.
All in all your system has delivered very solid returns. Nice job. Thank you for sharing!
Jean, Thanks a ton for the research. It will be interesting to keep an eye on that going forward. My guess is that the odds are stacked in your favor if you trade with the daily trend WHEN the market is trending strongly. And, since summer 2012, SPX has basically gone straight up with a strong downtrend in Oct/Nov and now May/Jun. Not much sideways action. It's always easiest to know that in hindsight. Patterns, EW, hunches, stats etc never really worked for me. I suspect using the daily trend (MACD or other) would get you whipsawed badly in a 3-6 month sideways market. The System also goes through periods of whipsaw but at a lower level of trend. I tried to combine the best of daily and hourly indicators to work under almost any macro market conditions or price action. Your point about risk tolerance is a good one. Somebody could only follow the System under ideal daily trending conditions or could increase/reduce leverage or position size accordingly. Thanks again!
ReplyDeletetest
ReplyDeleteS2,
ReplyDeletethank you for sharing your knowledge as well as your valuable time.