Current SPX Position: None (Last short trade closed 1648-->1670)
Next Action: Go short at 1668.34
System Score: 4.5=Neutral=Trend Score + Turn Score=10-5.5
Proposed New Score: 50%=Neutral=Trend Score + Turn Score=48+2
The System took a sizable loss on its short trade. I try to find something on each trading day (or at least half of them as I have time) that is interesting for learning purposes (myself and System included) or probability purposes. Today, I've got 2 educational items and 1 odds item.
As many of you probably know, the published SPX opening price does not usually reflect futures at the open or a true tradable level (at least for the post-open trader). So, for the betterment or detriment of the System on large gaps, I typically take the published SPX price that approximates the equivalent opening SPY level. Usually, that occurs on the 2nd or 3rd SPX minute, but SPY is not a true reflection of SPX either since it has its own nuances and bad readings and often slightly overshoots openings. Today, the published opening price for SPX was 1657. SPY opened at 167.11. The first 3 SPX minutes closed at 1664, 1667 and 1669. I actually took 1pt above the latter reading because SPY was closer to a 1671 equivalent and 1670 was a highly realistic tradable SPX level during the first 15 minutes. I've actually had extensive experience trading at the open and close in SPY, leveraged ETFs and SPY options, so I know what you see on TV or the charts doesn't always match exactly what you can realistically trade. I'd like to eventually come up with a more transparent, accurate way to do this, but for now we will live with this method which is probably +/-1pt in most cases. If you are aware of a better way, please let me know.
This is the 2nd or 3rd time I can remember a large losing trade being triggered by a 0-2pt s/r break that did not occur in the Dow. SPX broke below 1648.17 by less than 1pt while Dow barely held its 4hr support. I may study that while I study the performance of the Proposed New Score to determine if I should tweak the System 4hr s/r rule. There may be times that it allowed the System to enter or stay in a trade favorable to System performance. But, in this case, the 4hr support break led to a 6pt loss on the long trade and then a 22pt loss on the short trade for a total of 2 losses for 28pts whereas Dow 4hr support would have led a single winning long trade of 31pts thus far. That's a big swing of 59pts, but any system or money management technique has to draw the line somewhere and there will be near hits and near misses.
The Turn Score is now virtually at its most extreme and 4hr support is only a few points below, so the bears are in a high-odds position for a sizable pullback. However, once SPX sustained the 1620s+ for a couple days and broke the trend lines around 1635, the technical configuration turned very favorable to the bulls. It's usually wave 3s that keep chugging through typical overbought signs of a pullback, and we got that kind of action overnight. So, I tend to expect a 1-2% pullback easily staying above the 1620s followed by a 5th wave up. SPX already made a new closing high. There are still possibilities for a 3-3-3 double zz, 3-3-5 flat and 3-3-3-3-3 triangle among other patterns that could result in much much lower prices in the coming weeks, but a 5-wave rally above 1687 would dispel almost all of them and perhaps set a better trap or even a wild multi-month EDT scenario. In any case, the bulls are in charge for now with dip-buying probable for at least a few more days and hopefully the System will catch the next large trend. Good fortune.
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