Saturday, August 17, 2013 11:17:12 AM
SPY: imho a Valuable Tool!!
Nothing is perfect, but timing signals combined with trend identifiers are the best we can do. One of the best longer term signals I have ever found is shown in the chart. Define reversal points in a system that is always in the market (long or short) by noting whether the weekly volume is greater than the prior week AND the weekly direction (color of volume bar) is different than the last identified direction. Sounds confusing, but this is like a PNF chart defined by expanding volume instead of price moving by a certain amount.
The first up bar with expanding volume starts the leg, and the highest price before the next down bar with expanding volume ends the leg; the downleg starts with that same price. The downleg continues until expanding weekly volume occurs with a increase in weekly price, and the lowest price before that week becomes the end of the downleg and start of the next up leg.
In a PNF style action, violating either the high point or low point sets the trend and is normally a great action signal, as it brings with it large technical orders of a trendfollowing nature.
PNF signals suffer whiplash, and so does this construction. However, you can and do get signals without huge prior price moves, and major trends can often be traced back to this signal as a starting point.
I bring this to your attention because a Short Signal occurred on the break below 167.52 SPY.
How to use this trend identifier is up to you. If you combine it with a longer term system (although this has been known to hold for a long time), at the least you would be flat (this sys short while another sys is long means you are out of the market). At the strongest, you would be short already. If this is used as a trend bias, you are now looking for entry points using other indicators for a short position.
With the well-known seasonal in front of us, many Hindenberg Omens in play, and another budget/debt limit fight pending, perhaps the smartest position is to be somewhat short.
Nothing is perfect, but timing signals combined with trend identifiers are the best we can do. One of the best longer term signals I have ever found is shown in the chart. Define reversal points in a system that is always in the market (long or short) by noting whether the weekly volume is greater than the prior week AND the weekly direction (color of volume bar) is different than the last identified direction. Sounds confusing, but this is like a PNF chart defined by expanding volume instead of price moving by a certain amount.
The first up bar with expanding volume starts the leg, and the highest price before the next down bar with expanding volume ends the leg; the downleg starts with that same price. The downleg continues until expanding weekly volume occurs with a increase in weekly price, and the lowest price before that week becomes the end of the downleg and start of the next up leg.
In a PNF style action, violating either the high point or low point sets the trend and is normally a great action signal, as it brings with it large technical orders of a trendfollowing nature.
PNF signals suffer whiplash, and so does this construction. However, you can and do get signals without huge prior price moves, and major trends can often be traced back to this signal as a starting point.
I bring this to your attention because a Short Signal occurred on the break below 167.52 SPY.
How to use this trend identifier is up to you. If you combine it with a longer term system (although this has been known to hold for a long time), at the least you would be flat (this sys short while another sys is long means you are out of the market). At the strongest, you would be short already. If this is used as a trend bias, you are now looking for entry points using other indicators for a short position.
With the well-known seasonal in front of us, many Hindenberg Omens in play, and another budget/debt limit fight pending, perhaps the smartest position is to be somewhat short.
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