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.

Wednesday, July 20, 2011

just charts

Looking at the weekly SPY;  A head & shoulders pattern stands out (mirror image pattern as that of the bottoming pattern from the flash crash recovery (April through September of 2010).  It appears that the market bulls are at a critical juncture if prices cant begin to follow through from the momentum candle 3-weeks ago.
While the daily chart shows we had a strong selling binge from May through most of June wherein we corrected over 75% of that move on a strong squeeze which ended in an evening star pattern.  The 3/10macd may be setting up a 2a/2b criteria which often results in a good shorting opportunity.  I think a strong close at/above $134 may invigorate another bullish advance, but also feel that the overhead gap zone will see heavy supply come in.

This is what I'm looking at in terms of S/R

Meanwhile, the QQQ is interesting;  The weekly also looking like a topping pattern. The most recent move up registered a reverse divergence (higher momentum reading on a lower high) which would trigger on a tick down in the histogram.
The daily nearly printed a dark cloud cover pattern ("nearly" in that technically it is supposed to close at least 50% of the previous green bar, but fell shy of that). Also setting up that 2a-to-2b short setup. 

Here's an example of that 2a-to-2b short setup on the IWM weekly.  The idea is that the 3/10macd slow line is trending down as the fast line corrects into it, and it is triggered by a tick down in the histogram (indicated with blue arrows.  There was one instance that turned out to be a less than stellar trigger, but the others worked quite well (on a return to support-test basis).  However, the slow line now seems to be at a crossroads; it can turn up with added upside momentum, or it can lose its positive slope and continue negative.
The daily chart of the IWM is hinting at more immediate upside and if that's the case the strength of the upside test will have to prove itself on a closing basis, otherwise it looks to possibly trigger a 2a-to-2b short signal.

One other intriguing chart is that of the SMH.
The weekly is triggering (should the week close with the histogram ticking down as it currently is, but that IF remains) a 4c-to-4d short entry.  While the daily is waiting on the very same setup to trigger.  The chart had a few reverse divergences to work off, but what gives a bearish lean to this chart is how quickly the large green weekly bar 3-weeks ago was quickly wiped out.  A tell would be to see how successful price is in testing the overhead gap left from July 12th.


pezhead9000 said...

Do you use volume in any of your analysis? If so, do use anything to determine accumulation chaikin osc, klinger, MFI?


todd said...

I always have an intra-day chart with volume to gauge strength. It's a funny thing, when you look at a Daily SPY chart with volume; all the downswings are on heavy volume, while the up moves have a counter-trend pattern to them (up on lower volume), and yet pixels has been in an up trend for over 2-yrs. What does this tell us?
Anyway, I believe you can determine accumulation/distribution, supply/demand, support/resistance vis price behavior (I.e. how price digests momentum). Look at GLD these last two days, was there demand today after yesterday's supply?
Anyway, I guess what I'm trying to say is yes I gauge volume (on the broader market & individually), but it may not be the determining factor in taking a trade. I mostly focus on trading in the direction of the long & intermediate term trend in mind, and often enough, if there is a trend in place it has enough volume to sustain it until price gives signs that there may be supply or demand coming in the market.

todd said...

The word "pixels" in the above comment was supposed to read "price".
Bloody autocorrect.