Today's market action is the type of signal that my personal bottom spotting algorithm flags as significant for a market low.
I will probably not have time to give a more full background and historical trade stats from the model for comparison this evening, so I just wanted to note that for those looking to enter the market from the long side of stocks, I would consider with DIA or SPY to be a long trade here if there is a higher high tomorrow and the stop would be a penny below today's low.
As I have time to post some comparative stats, I will give guidance to probable expectation of upcoming action if price is to continue in bull market fashion.
But in trading it is limitation of losses that is the first order of business, and so if I were to be long or enter a trade here, the stop would be below today's low.
Reply or comment if there are specific trade management issues you would like addressed or an opinion on. I will do my best to assist you.
Pete
Showing posts with label buy signal. Show all posts
Showing posts with label buy signal. Show all posts
Monday, February 2, 2015
Sunday, October 5, 2014
Buy Signal In SPY 10-3-14
Everything currently looks just like the significant corrective bottoms in stocks over the last couple years. The gap up and advance after a buy signal from my bottom spotting algorithm seems like a good start to another move up to new highs for the bull market.
I have discussed the longer term technical set-up as showing multiple time frame bearish divergence and warned that we may be at the end of this bull market. This current action doesn't really negate that outlook on a longer term status, but it does seem more likely that this current rally could make a new high, at least in some of the major stock averages.
Until the character of corrections (larger size, faster rate of decline, greater time duration) in this bull market, change, I don't feel there is great CONFIRMING evidence that a top has complete. A failure of last week's low to hold would be a significant sign in my mind for a possible change in character.
Currently, I would suggest that the appropriate strategy for index trading here is to be long currently, but with a stop below last week's low, and to establish short at a close below last week's low for those who look to catch the major downswings as well.
As has occurred so frequently over the last 2 years at the significant buying opportunities in the indexes, we have seen a typical expansion in the VIX relative to the longer term bollinger bands, now followed by a sharp move back into the bands. In my opinion from this analytical standpoint another move in the VIX above the current spike would not fit the typical relation of the recent corrections and associated VIX activity. So again, from a little different angle, last week's low appears important. And looking out further than that, if there were another spike in the VIX and new buy signal, if it were followed yet again by another higher breakout in the VIX, I believe it could lead to a sharp breakdown in stocks an spike in the VIX. That is looking out kind of far, but is preparing for contingencies in market action.
One relationship that has occurred at most corrective bottoms in the last couple years is a VIX:VXV ratio closing above 1.0 during the correction. This did not occur this time around - but that is the only potentially significant disimilarity that I see at this point.
Other measures of intermediate term extremes in selling all seem to have reached the levels that have corresponded to corrective lows over the lat 2 years. Total put/call ratio, McClellan oscillator, TRIN are notable examples.
I am basically discussing this here to build a case that given the current signals, IF the current bull market is to continue, THEN a corrective low is likely in place already. That would make any move to lower corrective lows a very notable occurrence, and likely warning of significantly larger price declines in store (in my opinion).
Pete
I have discussed the longer term technical set-up as showing multiple time frame bearish divergence and warned that we may be at the end of this bull market. This current action doesn't really negate that outlook on a longer term status, but it does seem more likely that this current rally could make a new high, at least in some of the major stock averages.
Until the character of corrections (larger size, faster rate of decline, greater time duration) in this bull market, change, I don't feel there is great CONFIRMING evidence that a top has complete. A failure of last week's low to hold would be a significant sign in my mind for a possible change in character.
Currently, I would suggest that the appropriate strategy for index trading here is to be long currently, but with a stop below last week's low, and to establish short at a close below last week's low for those who look to catch the major downswings as well.
Click on Chart to Enlarge
As has occurred so frequently over the last 2 years at the significant buying opportunities in the indexes, we have seen a typical expansion in the VIX relative to the longer term bollinger bands, now followed by a sharp move back into the bands. In my opinion from this analytical standpoint another move in the VIX above the current spike would not fit the typical relation of the recent corrections and associated VIX activity. So again, from a little different angle, last week's low appears important. And looking out further than that, if there were another spike in the VIX and new buy signal, if it were followed yet again by another higher breakout in the VIX, I believe it could lead to a sharp breakdown in stocks an spike in the VIX. That is looking out kind of far, but is preparing for contingencies in market action.
One relationship that has occurred at most corrective bottoms in the last couple years is a VIX:VXV ratio closing above 1.0 during the correction. This did not occur this time around - but that is the only potentially significant disimilarity that I see at this point.
Other measures of intermediate term extremes in selling all seem to have reached the levels that have corresponded to corrective lows over the lat 2 years. Total put/call ratio, McClellan oscillator, TRIN are notable examples.
I am basically discussing this here to build a case that given the current signals, IF the current bull market is to continue, THEN a corrective low is likely in place already. That would make any move to lower corrective lows a very notable occurrence, and likely warning of significantly larger price declines in store (in my opinion).
Pete
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