Current SPX Position: Long at 1683.47
Next Action: Stop-n-go-short at 1678.11 (will rise to 1687.38 if SPX closes 10AM+ above 1692.63)
System Score: 5.5=Neutral=Trend Score + Turn Score=10-4.5
Proposed New Score: 54%=Neutral=Trend Score + Turn Score=48+6
The Score remains neutral but it could easily turn bullish with a 1% drop or less, and the Score is unlikely to turn bearish until the 1640s or lower. So, even if the 1690s prove to be a significant top, I would expect a week or two of gyrations above the 20/50dSMA. VIX dove on Friday OPEX to a level that has often provided support in the past year, and there are plenty of negative divergences and troubling signs. But, overall, many markets successfully backtested breakouts in June and are in the process of breaking out again and the technical setup seems favorable to buy-the-dip for at least another week. Good fortune.
This is a tricky situation for the bears as in order to get to 1640, where apparently your system would turn bearish, on the way it first has to start dropping 1% or a little more. If after a 1% drop the system turns bullish then it will never get to 1640 unless it drops from 1690 to 1640 in one go of a 3% drop ! It's a bit of a catch 22 situation.
ReplyDeleteTrigone, Correctamundo! That's why I expect a lot of back-n-fill at 1640-1700 even if SPX forms a significant top in the 1690s. The System does not exit trades immediately when the bull-bear state changes, but it does exit and reverse at the next 4hr s/r break. So, let's say the System goes bearish at 1678-1687, the Score could easily turn bullish within hours, but the System would ride the short until 4hr resistance was broken which at an extreme could involve a drop to the 1640s. But, odds currently suggest SPX ain't gonna crash through 1640 even if we get a 2-3% drop imminently.
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