Greece news has pushed SPX down to the 2080s. I am buying for a trade and I'll explain.
12 days ago before I went out of town, SPX deviated from the October and January patterns I was following, so I abandoned the call for a large down trend...temporarily. Once again, SPX traded up to 2115-2135 which has been my top price range and once again it has been rejected. However, I think there is a strong possibility for 1 more push up possibly beyond 2135 in a final head fake. Why?
1. Pattern: The broken Oct/Jan patterns and a 9-month extended EDT pattern allow for it with C of 5 to come.
2. Technical Indicators: My hourly S2 System based largely on hourly indicators is setting up for a buy signal although it requires a 4hr candle break to officially trigger.
3. Last Wed & Thu were BOW days and they typically hold up the market for a few days even if temporary 1-2% drops occur.
4. New System: My new system prototype calls for an immediate long trade (SPX 2082-2087 was available in the opening hour) with a 30pt stop loss, 20pt stop gain for 50% of position, 40pt stop gain for another 25% of position and 60pt stop gain (or trailing stop) for the final 25% with stop loss raised to the entry price at a minimum once the first stop gain is reached. I warn this is a work-in-progress. This system is based on objective scoring of technical indicators covering sentiment, breadth, price and volume and the current score is a strong buy with extreme buy likely if SPX falls much further. I have manually backtested it to 2006 and it does not always recommend a long trade during cascading drops (which I wouldn't classify today as anyway...yet) and, even when it does, taking partial profit near a 1% gain with stop moved up to entry price usually protects any early buys. The main reason I started researching a new system is because it fits my trading style better with fewer trades based purely on daily indicators and closing price (versus primarily hourly indicators currently) with known profit/stop levels (versus a moving/trailing 4hr candle stop) that I can set 'n forget at the close or open.
I think intermediate and long term technical indicators as well as cycles and economic factors still suggest a significant top is imminent, but one more push higher possibly to new highs appears likely. The July 4th holiday weekend, early July jobs report and the Greece situation could affect the timing and distance. Good fortune.
P.S. Ouch and ironic. Technically, the new system should have already been stopped out at 2073 because there was a Friday closing signal at 2104. However, I did not personally post it or trade it until this morning near SPX 2082 because I was out of town last week and finished much of the back-testing over the weekend. So, luckily, the trade had less negative impact than it could have. Having said that, the new signal at today's close is an extreme buy amongst the highest scores going back to 2006 despite the drop still being fairly modest at 3.5%. Also, today was a huge BOW day in line with other BOW days Wed/Thu of last week. Officially, the first trade of the new system is a 31pt loser (2104-->2073) and the second trade is open (2057-->???) with first profit target at 2077 and stop loss at 2026. It was infrequent in my back-testing to see 2 failed trades in a row and rare for 3 in a row with subsequent trades usually recouping any losses and then some. Of course, I may live to regret introducing a new system during the week of severe Grexit concerns into quarter end, but, for better or worse, I'll track it for a few months. Good fortune.
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