Current SPX Position: Short at 1671
Next Action: Stop and go long at 1663.61
System Score: 7=Bullish=Trend Score + Turn Score=3+4
Proposed New Score: 56%=Neutral=Trend Score + Turn Score=12+44
Meant to post this last night but here it is...Upon review, Dow hourly candles would have triggered a short trade prior to the Thursday gap down. That's 3 or 4 trades in the past few weeks in which SPX and Dow have diverged slightly on a trade trigger with Dow leading. The profit difference is sizable enough (the System could be at all-time highs) to seriously investigate if and when Dow candles should be used instead of or in addition to SPX candles. An obvious easy solution that would have fixed all of them and had the System at its high watermark is to allow the System stop level to be +/- 2-3pts (or perhaps 0.2%) from 4hr support/resistance depending on early or late Dow confirmation. I don't like that it complicates the System a bit but the System stop is already flexible up to 1% when the Score is in line with the current trade (e.g. the stop on a long trade can be up to 1% below 4hr support at a key MA/pivot if the Score is still bullish). I am in the process of back-testing this. I am a bit motivated by the official 1yr anniversary for my System this week, so here is my plan for back-testing in the next week or two.
1. Proposed New Score vs Current Score
2. Success of same day trades and back-to-back trades within 1 or 2 hourly candles versus all other trades
3. INDU/SPX divergence...possible +/- 3pt allowance at s/r
4. Evaluation if System is too slow to get bullish after deep falls...has happened a few times
5. Evaluation of other minor technical indicators being incorporated in the Score
I expect SPX to make another low Monday even though the Fib target range of 1647-1653 has already been reached. A 5th wave down is also possible. Either way, there should be limited downside due to some late-week buying-on-weakness and a rally perhaps back up near the H&S neckline at 1680-1690, but a weak B/X wave rally is possible especially since there are various lower targets at 1530-1605 in September. Good fortune.
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