Here is the last six months on a daily chart for the SPX.
As the value approached the 200dma it lost steam and started a small drop. I have not been watching the S&P500 for long enough to know how it moves so I would not be able to call the short entry based on the chart and the price proximity tot he moving average, so let's take a look at an unorthodox method that I have started using for day trading and apply it to this timeframe and see what happens. It is worth noting that I have not managed to use this successfully in my daytrading as it is still pretty fresh and I am doing some fake trading yet. I tried it on Friday but a tight ranging day requires some different angle than what I am using here. I haven't nailed tight range trading yet.
Here is the chart of the S&P500 with the latest long term trading noted.
The stop line is based solely on the price passing the next monthly pivot point, support or resistance then moving the stop price up to just below that point. One case I used the 50SMA as the pivot point for April dropped and I don't think I would drop my stop setting to suite, just use the next reasonable resistance line.
Now this is the kicker, here is the daily TICK chart that was used to set these trades up...in hindsight right now but I will start tracking as if I did place the trades in "real time"...or as close to that as I can get with daily chart bars.
SMAs are red = 5, blue = 10, green = 15 and yellow = 20...the dotted are somewhere in between and are not really necessary.
The 30 / 50 crossover needs to be confirmed by some upward (or downward for shorting) trending no matter what the price chart looks like. I have run these in backtests by marking the minute TICK chart and only afterwards referring to the price chart. Using the TICK data for exiting the trade is not as good as using the stops, so far as I can tell now. Interesting to note, and something I didn't expect, as the TICK indicated it was time to get short I may still be in the long position...depending on how tight my stop was set to the 1/2 R1 line. According to my chart I would still be in. Using ETFs is an advantage here as I can enter a regular one, SPY, SSO, to play the long trade and use a short ETF like SDS for the downside. Simultaneous long and short positions which are not possible in a single issue...although I have multiple accounts so I could manage this if I REALLY wanted to.
I think that the TICK trending is a very strong indicator for the S&P index and comes very close to being a leading indicator. I am working on a method of using this in conjunction with some sort of sector rotation to be in the ETFs that are moving the most consistently. That may take some time to get going though. One project at a time for now.
In order to track these trades I would, for now, use the previous day close price as the next day entry price. So for the trade entry on the 19th I will use the 18th closing price of $57.71. My stop will be just above the monthly R1 point...taking this over to SDS, well, this would be not as easy to manage as the price and averages for bear funds are not the same as they are for bull funds, leveraged or otherwise. Shorts are easier. I'd say the stop might be about $56.00 for now.
Enter = $57.71 ( I might have set a lower limit order to get in expecting a down day though)
Stop = $56.00
Last close = $60.54
For curiosity I checked the gain from SPY for the long trade.
March 11th entry at $72.17
Current stop at about $88.10
Nice tidy little paper gain. I may run some of these in one of my accounts to see how it goes...only I have to wait for the next good setup before placing a trade...the whole reason, or most of it, for me going back to day trading, I didn't have the patience to wait for a setup to setup on a daily chart. Maybe use part lots and not worry about the lack of stop loss orders for the smaller risk profile as a result. Just enough to prove a live system.
Jeff.
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