Weekly Recap: SPY opened the week with a gap up followed by two green days , one of which was a strong up day bringing us to new highs, only to end by two red days that almost deleted all the gains made this week. It may look like we have a reversal pattern in the last two days and it may be right, but I can not but feel that those two last red days of pullback saved the market from and almost sure major top. The reason is that if we did not have this pullback the weekly candle would have closed way above the Bollinger Band, something of a very rare occurrence that would have almost guaranteed a major top. We remain with a negative divergence and with the new high it became a triple one, and the pattern is looking like a shooting star, so it may still be a top but at least we skipped that signal.
From the system point of view we had its first trades this month (it’s about time) with a long trade that made 1.9 points profit. I am embarrassed to admit but I missed reporting on another reversal signal (and trade) that started on the 17th in the morning and lasted a day with a profit of 0.39 points, but since I am keeping score for the system I shall count it towards the overall score, so overall the system made 2.29 points of profit this week.
In the shorter time perspective, SPY broke the trend lines on Friday and is currently below them, just a little bit above the 4 hour trend line (170.52), so we should see some kind of a bounce here. I am expecting another leg down and an attempt to close the gap from the beginning of the week , but not to break the daily trend line. If the daily trend line breaks then we are heading for a bigger correction.
Battle Plan for the 9/23/2013
Looking for a back test of the trend lines and a reversal pattern
Stop loss lines should be triggered if there is an interval close above them (i.e. 60 min or 120 min ), they are published in the daily blog and updated during trading hours on twitter.
* Take profit lines should be triggered immediately when crossed, they are usually issued during the trading day on twitter.
* Entry signals should be triggered when crossed, but take into account that until there is a confirmation (i.e. close of the interval across the entry signal) , the signal can become a reversal signal.
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