Today in the SPY we:
Range-bound first half of the day
Tested the highs and lows
After such an impulse move to the upside yesterday we were to suspect a narrow, or range-bound day. Not sure why the sell-off at the end of the day, oh I know why; because we got a "First Cross" sell trigger!
Here's a 5-min chart of the SPY. We had three instances where the MacD average crossed the zero line, but only two of the three were legitimate triggers (because the first trigger, a short, the MacD average had a positive slope, not to mention vwap and moving average support). The other two triggers worked well, the end of day short didn't look like it was going to play out, but the bottom dropped out end-of-day.
I was listening to an audio presentation given by Linda-Bradford Raschke on ino TV, where she talks about a setup she calls a "Slingshot" trade. Of course this uses the momentum indicator on most of my charts, the 3-10 MacD (subgraph 1).
The rules of the "Slingshot" (Long entry) require;
A Higher Low in Price coinciding with a Lower Momentum Low.
So I just wanted to illustrate an example that I noticed for the SPY 60-min chart I have up. In this chart you can see two recent swing lows (March 17th and March 20th) that coincide with a lower momentum low. This behaviour led to a "Slingshot" in price (momentum could not drag down price). The question of course, is where/when do you decide to exit? Anyway, it's intriguing.
The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at email@example.com
I am always open to questions, comments, or suggestions on how to improve this blog.