Super Bowl Weekend Update
Started Feb 06 at 4:40PM (EST) (By PattrnProfts)
Transmitted from http://www.patternprofits.net
I'm not certain whether we put in an intermediate term bottom on Friday or not, but several signs are pointing to that possibility. I'll share a couple of those with you a little further down in this post, but first we'll take a look at the short term charts of the indices. We have several levels to watch early next week, starting with the 1080 spot on the S&P...
The path looks good for adding another 15-20 additional points on the Nasdaq before things become a bit more dicey...
The charts above represent levels that I'll be paying close attention to early in the week. I will base my decisions to buy, hold, sell, hedge, etc. depending on the price action if/when those spots are tested.
I mentioned we'd be looking for a $CPC ratio above 1.2 to mark the bottom. We got that on Friday...
Click Any Chart To Enlarge
We've got the possibility of about 100 more points of upside on the DOW before we'll have to pay close attention to price and volume action...
The path looks good for adding another 15-20 additional points on the Nasdaq before things become a bit more dicey...
The charts above represent levels that I'll be paying close attention to early in the week. I will base my decisions to buy, hold, sell, hedge, etc. depending on the price action if/when those spots are tested.
Arguably, the most important chart to focus on going into next week is the dollar. As you'll see in the chart below, the $USD broke out of a bull flag formation with a price target of about 4 points. I have this projected to about $81.50, but I've noted on several occasions in prior posts that I expected the dollar to struggle to overcome the $80 mark. On Friday, the dollar topped at $80.68 before giving back about half of its gain and closing at $80.36. I can't completely discount a weekly close on strong volume above $80, despite the market's late day heroics. If the dollar rolls back below $80 early in the week, then Friday's low will likely hold as the intermediate term bottom in this correction. If we see continued strength here, we may be in for more downside and possibly more than the 10% most are looking for...
I mentioned we'd be looking for a $CPC ratio above 1.2 to mark the bottom. We got that on Friday...
For those of you that may need a reminder of the last time we saw the $CPC reach these levels, I offer the following chart of the S&P...
I'll admit that I've been a bit discouraged lately by the shakeouts and false signals with the 5 dma on the 30 minute timeframe. This has been a solid tool for me over the past couple of years, but not as accurate over the past several months and the number of whipsaws are increasing. I realize no indicator is perfect, but I'm thinking the low volatility has been a contributing factor. I plan to do some backtesting over the weekend and see if I can find a correlation between its effectiveness and a low vs. high $VIX reading. Perhaps, and this is just a thought, in times of low volatility with the $VIX below 25, it's better to focus on the 60 minute timeframe and the 10 dma. I know this may seem counter intuitive at first, but during times of high volatility, the market is moving quicker and responds better to the shorter term moving averages. That would make the 5 dma a better choice when the $VIX is high.
The recent shakeout (highlighted blue circle below) would have been avoided and the signal would have been to stay short using the 10 dma method with the $VIX below 25. The other signals over the past couple of months were also profitable, as evidenced in the chart below...
Click Any Chart To EnlargeI'm always striving to find ways to improve performance and one can never have too many indicators in his/her trading arsenal. I'll keep you posted on my findings. In the meantime, hope all the football fans enjoy the Super Bowl and with a little help from Peyton Manning, I plan on getting a nice little payday!
I may or may not be back with another update before Monday's opening bell. If I come across any price patterns worth watching, I'll mention them in the comments section, if not in a full post. Enjoy the weekend and the big game!
I may or may not be back with another update before Monday's opening bell. If I come across any price patterns worth watching, I'll mention them in the comments section, if not in a full post. Enjoy the weekend and the big game!
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