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.

Friday, January 29, 2010

log form

As we end the trading month of January, here's a look at some monthly charts, in log format:
Dow Jones Industrial Average:S&P500
Nasdaq Composite:Russell2000:and finally, the U.S. Dollar Index:

Thursday, January 28, 2010

solar flags

In a previous post I mentioned FSLR as it was approaching a level of long-running support. Here's a look at the weekly:This week in FSLR has essentially been range-bound and looks to be setting up a bear flag (though the past two candles have been hammer's with very similar open and closing prices):
The $111 range has been bought swiftly 3 times this week, so if it's tested again we should look to gauge strength or weakness in the momentum/pace behind any ensuing bounce. Price above $116 (above the "W-bottom" apex) and we could look for a test of $118-$120.
Similarly, there's TSL. This stock has seen an amazing rally of around 1100% from the Dec.'08 lows (is that math right!?). Anyway, from it's highs back in July '07 TSL retraced 78.6% of it's losses in 1-year's time.
Immediately below current price levels is the 38.2% retracement off of the '08 lows to '10 highs.
The daily chart looks to be forming a bear flag, in which case if price breaks down from here there's a confluence of Fibonacci support (Fibonacci retracement from low to high and Fibonacci extension from high-low-high of the flag pattern) at the 50% ($17) and 61.8% ($13.50) levels.Price seemed to have based upward all week along the lower edge of this bear flag, watch for a break down out of $22.Similar patterns are also occurring in STP, and if you're into the penny stocks, ESLR.

so much for a bounce

Lower lows, lower close.
The SPY put in another decent volume selling day. In these past two weeks the SPY has had 3-days of 300-million+ volume. Only two other days going back to May of '08 have had volume over this mark.Also, our momentum indicator has gone negative (the slow line, a.k.a. the "Stability of Trend" -line crossing below zero). This has happened on three other occasions since March. When this happens we would look for the fast line to correct back into this slow line, where we would look to enter short once a lower high has been established ("First Cross" sell signal). On the chart below we have only really had one official First Cross sell signal, that one being back in June/July (first ellipse). The second and third time the slow line went negative, price quickly recovered with strong momentum to the upside.
The S&P closed right above support (1084).
Perhaps we'll get a Dow 10k test tomorrow?The Russell2000 could have some support underneath it:The Nasdaq had a bad day today

Wednesday, January 27, 2010

AIG $25

Can AIG recover and hold $25?!
Here's a look at AIG going back to the 70's.Here's where we stand for now
We came close to closing in a Hammer candle today, and though the volume wasn't as strong as this issue has seen in the past, it was reasonably high today, with a big order coming in to rescue it from the abyss. Watch the follow-through develop from here to see what kind of a bounce this order manifests. Direct overhead resistance at $25, support now at $23.
It could make an attempt for $28 if it can get the momentum behind it (not a necessarily favorable risk:reward ratio), but it will obviously be affected by any news that may come up.

Fed day bounce

The S&P found anxious buyers at the 1084 level. Now we gauge how far the deep pockets are willing to ride this thing. Should be gap up tomorrow we should be looking for whatever dip there is to be bought. I suspect we would likely get a rally of some sort tomorrow, should Bernanke be confirmed for another term?
The first level of potential resistance is around $110.50 on the SPY. Should we test higher, the range between $113-$114 will be significant.There's a lot of bounce potential out there; take a look into GS and FCX:

Tuesday, January 26, 2010

fear sets in

Things were moving along nicely today until it all fell apart. Resistance at the previous day's high held (also 50% retracement off of Friday's long range bar), and a double top (a triple top even!) was catalyst enough for a collective dumping of shares and ending the day right where we started. Bulls were likely looking for a strong close today in order to gain confidence that a bounce was in motion (also would have confirmed the Homing Pigeon bullish reversal candle pattern from yesterday). We're back inside a previous consolidation range. A breakdown from here would be significant, but we'll have to wait and see how enthusiastic buyers are at the $109 area.
Of particular interest;
The recent momentum down has registered the lowest momentum reading since the March "bottom"Also, looking back since March, there haven't been many occurrences where price attempted to rally following a sell-off, only to be sold into a long legged doji and closing below the previous day's close. It's actually been quite rare for price to retrace so little of a previous sell-off move.
And, just for the fun of it, here's a look at the cycles spanning these past few days in the SPY:

Monday, January 25, 2010

Approaching Support

A long running level of support in SUN is approaching, will we get another bounce?
Price has bounced from this level before, but the "pace" seems to be weakening.A breakdown below $25 could send price back to test $21

Also, keep a watch on FSLR as it approaches $104The $104 area may be a good place to buy for a bounce, with this buy divergence building at this point.

Also, AEM watch $52

Homing Pigeon

A bullish Homing Pigeon candle pattern has taken shape on the SPY today (likewise for the Q's, DIA, & IWM). Similar to a Harami reversal pattern, the Homing Pigeon merely calls for a close lower than the open on both candles. Confirmation of a bullish reversal is required, and one would be looking for at least a close above today's range.
To further strengthen the case for a bounce in price from here, there's a reverse divergence present (higher low in price, lower low in momentum), and price looks like it closed on top of a support level.

Friday, January 22, 2010


Below is a 30-min chart of the SPY with the Inverted and Regular Cycles (as I wrote about last weekend). Here is the same chart, only this time including the PTT's (red line - Price and Time Targets) and the CTL (purple line - Cyclic Trend Line). Confused?Well, the hardest problem I have seen with Stevenson Price and Time Targets was determining when the Inverted Cycle ends and the Regular Cycle begins in real-time. According to Stevenson, this happens when price makes a close outside of the CTL.

As a refresher, the Cyclic Trend Line (CTL) is drawn by connecting the most recent swing low to high, this line is then moved outward so that it touches only a single price point.

However, when doing this in real-time you'll never know whether the previous high will be taken out (invalidating the end of the Inverted Cycle and confirming the continuation of the Regular Cycle in which you're in), so you'll have to continuously watch for strength or weakness at previous swing highs/lows (perhaps a very good habit to be in).

For example; If you're in the second half of an Inverted Cycle (price moving higher) you will be expecting a transition into the beginning of a Regular Cycle once price breaks the CTL). But once price breaks the CTL there is still just as much likelihood that price may continue making higher highs. Therefore, you should always be looking for a retest of the CTL, or some sort of price topping (or bottoming) pattern.
Referring back to the above overview chart (30-min) that includes CTL's (purple lines), I'll include the same CTL's on our trading chart (the 5-min).

This first chart shows the day of Jan. 20. where we're in the tail-end of a RC. Price closes outside of the CTL, but that's not an actionable signal. We wait for price to tell us whether we'll likely make a lower low (and continue the Regular Cycle), or whether we should look to get long in anticipation to ride the beginning of an Inverted Cycle up.
After a low was made, price rose and tested the previous support level, before selling off (market internals likely telling you to sell resistance?). Price then began to stabilize and base at that resistance level, before breaking out, much more of an actionable sequence.

Now lets move to the end of that day and the beginning of the following Thursday. We have a Cyclic Trend Line in place which price tests at the open. Right away we get a bear flag, Open range breakdown out of the CTL (beginning our Regular Cycle down).Once this CTL is broken we anticipate the beginning of an Inverted Cycle. We see a bottoming pattern develop in the form of an Inverse Head & Shoulders, we buy the breakout, but price gets sold. OK, so we get stopped out, but we learned a valuable piece of information. We learned that sellers are still prevalent in the market and price may want to go lower (at least to test the lows perhaps).

Finally, I'll include the last two days in the SPY with the CTL's in place. Notice we had closes outside of the CTL with some tradeable pullbacks to this line that coincided with technical patterns (i.e. a Head & Shoulders breakdown into the close of 1/21 and the open of 1/22, a lower high breakdown around 12:30 on the 22nd).
I hope this isn't too difficult to follow. If it is, I would love to hear from people who might have valuable input. Anyway, trade in the direction of the cycle!

Wednesday, January 20, 2010

Tuesday, January 19, 2010

Toni Hansen videos

Check out this series of videos given by Toni Hansen; great stuff.

Also check out Part 4, Part 5, Part 6.

Quick Update

I showed this chart yesterday, and wanted to include an update.
Price hit the PTT early (a sign of strength) and the Inverse Cycle is still intact.

S&P cycles far and near

Again, off the heels of my previous post, here's a look at the S&P500 index as well as the SPY.
Using a weekly chart of the $INX, the cycles are blatant. Two big Regular Cycles, with an Inverted Cycle in between. Currently we're going through an Inverted Cycle.So what do we have?:
- The first Regular Cycle lasted for 409-bars and spent 276-bars (weeks) going up and 133-bars going down. I didn't actually plan this near perfect symmetry. I simply chose the bottom of the prior Inverted cycle that price experienced before going into our debt & leverage fueled price propulsion.
- The Inverted Cycle which followed lasted for 394-bars and spent 133-bars going down and 261-bars going up (amazing symmetry).
- Now, the Regular Cycle, which ended in May of 2008, had a span of 334-bars with 261 on the way up and a mere 73 on the way down.
- The Inverted Cycle we are now in contains 119-bars so far (slightly more than half of those bars going up following our last 73-bar down swing).
- The slope of our "trend" is definitely down.

Now, we know from my previous post, that a cycle is deemed complete when price closes outside of it's Cyclic Trend Line (CTL, refer to my previous post to understand how the CTL is measured and projected), like so:
To say the current Cycle we are in is a bit long in the tooth would be an understatement. Provided we don't melt up from here, a weekly close less than this weeks bar would put us under the CTL, thereby ending this Inverted Cycle and starting the next Regular Cycle (which has a PTT projection well under the March '08 lows (and should contain approximately 100-bars).

So, that's a little longer term perspective. Here's where the SPY sits as of Friday:
I'm using a 90-min chart so as to take away some of the noise that this market has been putting out over the past month.
Within this timeframe, price is in an Inverted Cycle and the PTT's are shown in red lines.
The slope of our trend is flat to slightly down (the past two Inverted & Regular Cycles have had highs and lows within a penny of each other). So, from here we would be looking for a test higher, while a close under a CTL would give us the start of our next Regular Cycle.

Sunday, January 17, 2010

Charts with PTT

Following up on my previous post regarding Stevenson Price & Time Targets, here are a couple charts I've been looking at:
Recently finished a Regular Cycle (RC) down. The overhead red line marks the PTT and the purple lines mark the Cycle Trend Line (CTL). Within these larger cycles, there are also smaller cycles at play (though we should dial down too far, or risk falling down the rabbit hole. Notice that both cycles have approximately the same number of bars in them. The previous Regular Cycle ended when price closed outside the CTL (ended up retracing towards it before continuing). The Inverted Cycle's PTT was overshot, but arrived right on time (this is either showing us strength or short covering, or a combination of both being that price was right on top of long-running support.
From here we look for a close outside the CTL to determine the end of the current Inverted Cycle (though we should prefer to wait for a retracement back to this CTL to gauge whether price wants to continue higher, or fall lower). The PTT of the Inverted Cycle is the most current red line on the chart, there is strong support above it though, and the slope of this down trend is beginning to flatten.

This stock finished the week, printing a Dark-Cloud Cover pattern, after filling a long-term gap. The daily chart shows the most recent end to an Inverted Cycle that actually hit the PTT early. The current PTT is drawn in red while the CTL is purple. There are two clear possibilities; (1) Continued downside, where we could target the PTT, and perhaps look to buy a bounce, or (2) Price makes an attempt to tag the CTL above, in which case I would be looking to sell this move.