The SPY consolidated most of the day until breaking out. To keep things simple, here's a look at price on a 3-min chart. It exemplifies perfectly a high probability setup; a price impulse to the highs of the day, tight flag consolidation right at those highs, followed by further upside impulse. This setup is quickly becoming my bread & butter play across any security or time frame.Not sure if today's breakout was irrational exuberance or not, but looking at a higher time frame gives me the impression that we're WAY over-extended. On this 60-min chart we have a gravestone doji at the end of the day, while the momentum indicator is correcting off the slow line in a negative way:Here's another look on my standard 5-min chart of the SPY. Not indicated on the chart is the end-of-day bearish momentum divergence that is similar to that in the higher time frame above:
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.