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
I am always open to questions, comments, or suggestions on how to improve this blog.

Saturday, June 26, 2010

SPY cycle update

Some more updates on the Stevenson Cycles in the SPY, with a few different scenarios;
Here we have a broad, generalized look at the larger cycles at play:A little more complicated version I came up with, which illustrates how after a big full cycle completes (the IC trend up from Feb. through April and the "flash crash" scenario that played out to complete the IC/RC phase) one can expect a RC/IC consolidation phase that forms a range with cycles of lesser amplitude. It is also helpful in how it can highlight when price is "coiling" as it did in the most recent phase:Here's an alternative which shows a little less noise than the one above:And here is one showing where the complimentary cycle targets where (solid red lines). The targets weren't met until price started to stabilize after the large momentum thrust:

I haven't done a post regarding the Stevenson PTT in a long time, but that doesn't mean I don't pay attention to the cycles playing out.
Going back to the beginning of the year on SPY, we saw the Inverted cycle complete, while the Regular Cycle target was met early (sign of weakness).
Next we have the "flash crash" selloff that completed our Regular Cycle (RC) leading to our next Inverted Cycle (IC) which is now down. We have two Cycle targets that are still valid:- We could just start rallying like crazy to go back to April highs, thereby completing an IC that would be just as wide as our previous Regular Cycle that stretched from Feb. to June.
- The bottom could fall out, confirming a close of our Down IC and giving us an extended Regular Cycle down.Price still seems to be recovering from the flash crash supply dump, and though be it wide, price is range-bound. Recently, we've seen some volatile supply/demand imbalance, which shows itself in wide, steep, and rounded cycles close together, like so:The previous Regular and Inverted Cycle targets were met on time (as they often do when you see such symmetry), while the most recent cycle, should complete (and start the next Inverted Cycle) with a close above Thursday's high.Whatever is going to happen it should be a big, strong move as these wide, steep, and rounded cycles close together often precede such moves.We saw this on a smaller scale back in April:I also happen to have a screen shot of an intra-day chart that set up this past week in MON:This behavior isn't subtle either. The price moves preceding it (in this case, a trend down with relatively average range bars) appear as orderly and typical of the observable environment. Then you get this order flow that is out of the ordinary compared to what came before it, obviously sucking in some positions that needed to cover (bringing fuel to the fire).

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