SPY Update

Last update we were at a turning point where the SPX was indicating a large scale move was about to happen and boy did it happen! As I indicated in the post, my algos had taken positions but I was still waiting for a confirmation (break of 2640). The break came that same day when SPX plummeted into the end of session, closing below the 2640 support. All told, that post was good for a 300pt trade!

The following week, the same free RSI Trend Cycle indicator I give away on TradingView indicated a rebound on 26 Dec 18. The trade was good for another 300 pts back up. And so now we’ve returned to the trading range.

The question on everyone’s mind is, are we here to stay? Thus far, there’s not enough info. RSIT algo says “good for now”. Looking at price action, we’ve been building a base for a week now. I’m looking to see some forward price momentum, otherwise there’s serious risk of falling back out of the range. Yesterdays trading was a good start.

This is once again (last week and this week) a great mid risk trade. There’s 200 potential points on the upside while a cross and close below support could spell disaster and 200+ points to the downside. Pattern-wise, a stable consolidation that doesn’t breach its lowest low (~2613) is usually a sign of trend continuation. The last possibility to enter low risk would have been on the yesterday. With Stockbot in active dev, I’ve unfortunately been posting far less frequently. That’ll change soon. (more on that later)

If you entered with RSIT, you’re 300+ pts up (15k per contract) and this is an easy hold for now. If you just entered on the 2640 cross, then it’s still a good long (risk reward wise). If you’re considering entering now, it’s a technically good trade but now has a moderate risk so you might find yourself searching for a good entry.

The free Wave Momentum Indicator algo I also provided on TradingView helps in this area. Being able to see micro-pullbacks, gives you better visibility when it comes to long/short entries.
That’s all for now.

Stockbot Update

We continue working on Stockbot and are edging ever so close to release. We decided to push the alpha release back for a few weeks while we perform a redesign which I think will make it easier to digest the information. Once we get the alpha out there, I won’t feel so bad about my post being a day early/short due to not having the time to set aside to write them up. We’ll be back on a normal posting cycle and making money together.

Thanks and trade safe

JMX

New Highs!

So it’s been a while since my last posting but my view of the market hasn’t changed. The market will do what it wants with a current preference to the Long side. That’s true until it’s not. In the meantime, all we can do is pick great entries, manage our risk and keep an eye out for any fundamental shift in market direction.

As you can see, performance of my free RSI Trend Cycle powered algorithm continues to do great capturing 80% or greater of each market wave. While this is the simplest of the algorithms that I use, it’s flat-out the easiest and most consistent over the large scale in particular when you’d prefer to trade trends and not have to worry about entering and exiting everyday.

Below the chart I’ve also plotted the ATR which I track on occasion as one possible measure of volatility. In this case, the reversion of the ATR to the 20 range could lead us to believe that out-sized market moves may be on the horizon.

Below that is the free Wave Momentum Indicator which I posted last year. The backdrop of that indicator (going from yellow to red to green) uses a variation of the Hilbert Sine signal processing algorithm. In general, it yields a measure of the relative fluctuations within a market and can warn when volatility is on the horizon. Green indicates bullish movement without much variation, red indicates bearish movement without much variation, and finally yellow means competing cyclic forces.

In the context of price movements, I tend to keep an eye out during yellow periods as they can represent the end of “sleep easy at night” money and a turn to “omg should I hold or sell” type of market movements. Of course, as you can see, these movements oscillate back end forth with enough frequency that a few yellow days isn’t anything to panic about.

The combination of breaking above all time highs, retesting the high once, hitting new all-time highs, hitting a trigger, and having a low (for the period) ATR means that I’m playing it slightly more carefully though not anything I wouldn’t normally do. Careful does not mean ‘tight stops’ or even ‘small lots’. Careful means considering all the data and selecting your stops/etc based on the data at the present moment (today).

There aren’t any indicators that can tell you the future, but we CAN use indicators to give us high probability entries and exits. The high probabilities only work in our favor if we’re diligent about taking each signal as soon as it activates (provided we don’t have an abundance of contrary info).

Trade Safe

-JMX

Stockbot update 5-16-18

Yesterday’s market action signaled the end of the ‘easy money’ portion of this recent bullish run-up. While there may still be more to go (or another stage), at this point, the bullish momentum was solidly crushed/reset.

Using a few of the simple tools I’ve presented on this blog, namely the RSI Trend Indicator, the Momentum Indicator and the Weiss Wave, we can draw a few conclusions here.

First, we are still in a bullish RSI cycle that may be reaching a temporary or a cyclic top. Second, our Weiss Wave read which helps judge the relative velocity of a momentum move has been reset from a growing build up of bullish momentum. Lastly, the market remains in a chop zone with price action occurring within a historically narrow range.

With this information in hand, it makes the intra-day trading strategy a little safer. We know that we should be prepared for a potential mean reversion this week. If that happens, we should be prepared to trade put, trade short, or step aside for a period of time. This being a price action chop zone (yellow area), we can reason that intra-day moves may contain fake-outs and the overall cylic trend (from May 1st or so) may continue until we get an RSI firmly falling.

Lastly, I should note that the price action crossed above the 2720 line I had indicated in the last update. This gives a slight preference to the overall price movement being bullish and perhaps a temporary retracement occurring prior to a run higher.

To put in into perspective, the chart below shows the market action based on classic support/resistance levels. As you can see, the price has broken above the normal consolidation zone and may potentially be forming a support level before jumping higher. It may also fail at this point. That is what makes this a tricky zone to trade at a longer time-frame.

 

Momentum moves are based on price trends. If we see the market reversing yesterday’s decline then it’s further evidence of price continuing on the existing (favored) bullish trajectory. If we instead see continued volume selling, we can be reasonably comfortable with the assessment that prices will decline over the near term.

From a systematic trading perspective, you’d typically only want to enter your trades at signal high/low. This wouldn’t be a good time to enter long/short. Sure, the market can rocket up/down today but from a probability perspective, if you’re entering trades between your signals, you’re not actually utilizing the model that you’ve calculated.

The same indicators above can be used on a 15minute time scale (and perhaps a little lower) for those that prefer day-trading.

At this time, one of Stockbots Momentum Trader algorithms trades the 15 minute time-frame 24/7 using a variation of the data above as its entry/exit data.

On another note, I continue work on the Stockbot website which has been slowed somewhat by the wedding plans. I was in talks with a brokerage last week, discussing ways in which the ‘bot’ algorithms could be automated and perhaps auto-executed on your trading platform. Of course this is very specific to each brokerage.

Until Next Time, Trade Safe.

-JMX

 

 

Stockbot Update and Analysis- Welcome back!

First things first..

The past few weeks I’ve been hard at work both refining a series of algorithms for the forthcoming Stockbot release (as well as negotiating for the domain/etc) and handling the surprisingly much more time consuming process of preparing to get married in a month, haha.

I took the time this week to loop back to the Benchmark S&P 500 strategy I posted here a few weeks ago. This strategy was the first in a series of new simple strategies I developed for Day-Trading the E-Mini Contract. I posted the initial algo to TradingView and I’ve since migrated the more performant version to my futures trading platform of choice, NinjaTrader. Being that I’ve primarily used C#/C++ as my strategy development language in the past, NinjaTrader was an easy choice.

Below is the performance of the S&P 500 Benchmark strategy since the initial posting (on a single contract basis).

As you can see, after a brief downturn in mid March, it has once again continued its profitable march. It’s definitely choppier than I would like but this strategy is designed to follow near-term momentum and makes its biggest profits (and largest drawdowns) during peak volatility and chop zones. Bear in mind that this strategy is primarily FOR choppy and high volatility sessions. Once the market returns to ‘normal’ it’ll be much better to simply stay long or adapt a long-and-out strategy where you move in and out of the market but rarely short.

You can find this strategy on TradingView here: https://www.tradingview.com/script/3QiQZx1p-S-P-500-Benchmark-Strategy/  — it is primarily a day-trading strategy, performing most optimally in the 15m range (though I’ve used it in 5/30/60 as well).

Analysis

The past few weeks have certainly been quite a ride. My analysis last month pointed towards a potential for a trip north if the SPX could hold the mid-term support at around 2613. That has indeed held but the outlook is beginning to look sketchier and sketchier from a long-term perspective.

My Long-Term Heaven and Hell warning chart has been warning that the SPX is playing with fire. RSI on a weekly basis continues to barely tread water, keeping above my line in the sand 47. If we were to look at the price action historically, then I’d say that moves like this have typically bottomed in 0-2 more weeks, otherwise turning catastrophically south. While still playing with fire, as long as the SPX can hold that line, the longer-term momentum is still bullish.

I’d be watching the 2700-2720 area. A rally over the down-channel of 2715 could signal the beginning of that march towards 2800+.

Near-term, I’d favor the bearish outcome which is a trip to 2570 or lower over the next couple of weeks. In some ways, that lines up with the Heaven and Hell indicator of mine which points towards a few more weeks of lower lows.

All that being said, it’s much easier to either trade the larger moves or nimbly trade the day moves (as I do).

Below is the simple trading that can be done with my RSI Trend Cycle indicator (which I typically show to close friends of mine). As you can see, trading at these time-frames allows you to avoid the pain of day-to-day chop. (see my post on my free RSI Trend Cycle indicator and Moment Trader Indicator shown below).

Something else you’ll find interesting is the clear consolidation pattern emerging. We are clearly gearing up for a potentially large move!

 

As always, trade safe.

Stockbot Market Update – 3-1-18

Wow what a trading day yesterday was. Stockbot’s two tiny updates that I posted yesterday morning were able to capture nearly the entirety of the pop and drop trading session!

As noted in my last update (2/23/18), the upside target zone was captured (just shy of 2800). The market rallied to the former “parabolic rally” support which has now become resistance (thick red line). As was also mentioned, downside risk was much higher than upside risk. I mention this again because managing risk is critical in sessions like these.

This is not to say that the market is done rallying. We just have to take the facts as we know them. The rally appears to have formed a rising wedge which broke to the downside (near-term bearish). Nearest real support is a long way’s down.

With the near-term rally channel broken, bulls will have to work hard to create a support zone in order to launch another attack at the 2800 line. Sustained trade below 2720 would be bearish.

From a momentum perspective, Market DAILY momentum is pointed south if it not recovered by end-of-day. The last time this happened was 1/30 and it was the warning before a severe decline.

Coming into this morning’s session we do see near-term Bullish momentum building (15m and 1h) which are typically good signs. We’ll have to wait until this morning’s open before we know if it’s a fake-out.

The RSI Trend Cycle indicator which I posted a few day’s ago does a decent job at giving downside warning’s at lower intervals (1m/5m/15m) but of course the lower you go, the more volatile it becomes (giving warning’s throughout a bullish run instead of just during key pivots).

I will be away from the market this morning but will be back to post updates probably around noon. Hopefully in the near future I’ll have stage 1 of Stockbot complete and we can have some automatic posting of momentum triggers.

In the meantime, the overall picture as of 0859 is energy, metals, and currencies trading lower while SPX/ES continues to build some bullish momentum this morning. Agriculture continues to lead the market (corn, wheat, soybeans).

SPX mid-term downside target is initially 2650 if bulls lose it here. SPX 2800 remains the price to beat on the upside. Bulls are probably hoping for a day 2/14.

 

Momentum Trades will be posted when I return home in a few hours.

Update 1240: Stockbot initiated a SELL of SPX/ES at 1215 which has continued, and is gaining strength. This may finally provide a trend change direction to this morning’s chop. With the volatility today, you’ll definitely want to watch your stops.

Note if 2700 doesn’t break decisively in a few bars we may be in for a sharp retrace higher.

Update 1311: For anyone following the last SELL, you’re at least 20pts happier 🙂

I’m taking some profits around this level (presently 2680). I’m still looking for 2650 if prices break lower. At present, momentum is solidly bearish until pulls can prove otherwise (the yardstick grows ever further).

Note that bearish momentum will likely confirm on an hourly basis if prices stay under 2700.

Update 1323: Tread carefully here. If bulls can successfully build a base then the bounce target is 2704. Below 2681 and we may see a waterfall for another 10-20pts short. I’m watching the 1m momentum for signs of snowballing into 5m/15m.

For bears, trading below 2695 keeps the bearish channel alive. For bulls, breaking that and recapturing the dropzone (2700-2704) would be a first target.

I typically close when I see the market meeting resistance. In this case, I took off half risk at 2682.5. Stockbot is still short from 2709.

Update 1333: Added “zone to watch” below:

Update 1350: Took profits on new position at 2677. Stockbot still short from 2709

Sometimes I get asked “how do you know when to close a short?”. My little day-trading trick for that is to monitor the Weiss Wave. I’ve found that when a large bearish Weiss Wave abruptly ends, it’s usually the earliest signal of at least a temporary reversal. Sometimes it’s temporary but more often than not, a momentum signal will trigger shortly afterwards in the opposite direction. It’s not perfect but it tends to help me dodge sudden reversals.

Example below:

As you can see, it does _not_ tell you how to get back in. As a result, I primarily use this signal for determining when to cut part or half a position during a major day-trading move. Sometimes, if the price lands at a key support, I might cut 90% or all of the position to prevent losses from a strong bounce. It all depends on market behavior shortly afterwards.

Update 1404: As we approach the target from this morning of 2650 you’ll want to become nimble. Sudden reversals from over-bearishness can eat up your profits. Took profits again at the WW pivot as marked above. I’ll be watching for another entry or to close the remainder if price action is pointed higher.

Update 1409: If it’s not already apparent, the decline appears to be accelerating in intensity. If bulls can’t get a decent bounce above 2672, it looks like this drop will intensify shortly.

Update 1411: 1M SELL renewed on ES

Update 1417: I can’t possibly post every 1M (1 minute) pivot so, please trade carefully. 1M SELL above ended at the 2659 level. It’ll probably come back around. 2665 and 2668 are first two key levels for bulls to recapture short-term and 2678 if they want to have a chance at stopping the decline. Decent bullish momentum coming in on this bullish move.

Update 1420: first two bullish targets captured (the easy ones). If you haven’t aready secured some profits, you may find the next bit painful if bulls make a run for the next bullish level.

5/10/15m Bullish Volume broken to the bull side so, this bounce could be larger than the last few. Due to the overall trend being negative, I will favor a bearish interpretation for now. That means, I will enter short again when momentum reverts. I won’t chase long signals until momentum breaks the levels I specified above (particularly 2678).

Update 1430: Stockbot signaled “Early Warning Trend Change” on SPX. At the moment, I’m discounting this until bulls can clear and trade above 2675 (current trend-line area). That being said, with the 1m momentum bullish and continuing (though not gaining much ground) it looks like bulls are building a foundation for a rally.

Update 1440: Chop zone and return to very-near-term bullishness (at the 1 minute level). Still no overall bullishness but bulls have now made enough of a base to make a run at the trend line and break bullish. Careful now if you’re bearish.

Update 1445:  If you’re one for gambling this trend line is your best risk/reward zone near-term. Bullish momentum is kicking up but still failing to trade above the resistance zone. Bullish if trading above, bearish if fails.

Major battle going on around the trend-line. I managed to grab a few good trades up and down. Bias overall is still bearish while bias near-term is still bullish. Zone of trading is a 7pts (2665 to 2672). Trade on either side of this range have a great risk reward.

Update 1458: While the longer the bulls battle here, the longer the price has to break the trend sideways, the more they’re building a pennant. Bulls now need to hold above 2669 as the trend channel turns from resistance to support. Momentum and volume are near-term bullish (at this time)

Update 1502: Early warning of pennant breaking for the bears. We’ll see if momentum continues to build. (break down from 2667.50). Still not seeing volume confirm so bulls are holding this decline for the moment.

Looks like it may have been a fakeout (hence the volume wasn’t confirming).

Update 1509: Closed and took a long position at break of wedge on bullish momentum to the north. Close stop in the event that we’re in for more chop like the last few sessions. If not, then this will possibly turn out to be damn near the bottom for the session (assuming bulls can hold)

Update 1517: Wow! Caught that one perfectly. Momentum and volume continue to push this mini-rally higher (20pts on SPX now). Some resistance in the 2680 zone but if bulls can hold above 2680 then we’re headed higher. Watching momentum and price action carefully now.

Update 1520: Ack, this is why I take every other day to trade without posting. I missed the 2680 consolidation zone which I was planning to load up for a further move.

Update 1527: Pivot zone is still in play with bulls unable to break above 2690 and holding 2680. Momentum is near-term bearish and volume mixed. At this point I’m flat until I see some clarity.

Update 1531: Momentum is skewing negative at the moment. In short with a close stop (in the money as I type this.. fast move). Looks like bears are winning the struggle. Next decision point at 2671 ish. which is the former resistance zone.

Update 1541: AS we come to the final 20mins of trading, price has fallen into a declining trend channel and just popped back under the recent bullish support. Bulls will want to catch things before they become two bearish. A mere 3 point rally could invalidate the bearish channel (not hinting at anything for the algos!)

Closed half as I posted that.. as the bulls did in fact make their small rally to very-short-term save themselves at 2669. Will watch for another entry short or to see if bullish momentum returns. **Flat and awaiting entry.

Update 1545- 1m signals bullish. Bulls have a lot to prove to hold this. Let’s see how this shakes out. Potentially a lot of money to be made end-of-day if bulls or bears fail.

Interestingly enough, Stockbot looks on the verge of signalling bullish. 5m trend has been bullish since our 1425 signal. In other words, that dip from 1525 to 1545 looks to have been a W2 of a potential larger bullish rally that is forming.

Once again forming a base at 2680. I’m in a long for a small amount from the initial signal. Looking to add if we can break above resistance from earlier. Will cut and run if we pivot.

Done for the day!

Results:

Stockbot Trades: Short from 2709 closed for a gain of 30pts per contract ($1480 per contract)

Manual Day-Trades: 20 trades (in and out) 6 bad and 14 good. A gain of 19pts per contract ($930 per contract) average after subtracting wins and losses. That means Stockbot beat me today but daytrading today was quite a bit of fun! 

I typically trade 2-10 contracts when daytrading depending on risk and how long the momentum is running, which allows me to partially exit/etc effectively and provides a nice additional revenue source. 

Typically, unless the market is very choppy, Stockbot's longer trades (I only allow it to trade 15m, 1hr, and 1d events) usually work out better than my day-trades.

Incidentally, trading SPY with the same same entries would have netted you 3.36pts  (~1.19%) or ~2.41% if short UPRO. Bear derivatives like SPXU also work but their signals are inverse.

My point is, if Futures Trading is too high risk (understandable), or too complex (also understandable from a risk management perspective) then trading SPY/UPRO and other ETFs can allow you to profit from the same moves in a safer way. It is also a great option for when the market is choppy and you don’t feel like having to put a lot of money at risk on large stops.

Future plans:

Going forward I plan on continuing a 1 day on, 1 day off schedule as far as updates.

To help people out, I’m going to be posting some longer-term month, week, day, trades. I might also mix in some of the stocks I trade (nothing exotic, just your typically S&P constituents). I’m teaching my fiance to swing-trade stocks so I’ll be using that as a chance to post the trades.

I hope I was able to help everyone have a profitable day!

Trade-Safe

JMX