We said in yesterday’s article that we thought we might be on the verge of the early stages of an upside blow off in the S&P if we held 1920 and, sure enough, that appears to be what we are getting.
However, there is a proprietary indicator that we track that we call DQ (short for Disequilibrium) which is very similar in its use to CIT cycles but is applicable on a much longer term basis. That indicator turned positive on Thursday suggesting that we are probably close to at least a short 1 to 3 day correction lower.
Either way, we got a nice range expansion today and, with a little luck, more volatility and decent trading ranges are back for at least a little while.
In the meantime, here’s what we had to work with today:
We started off with a higher open that traded just above the upper band in the early going. A bearish momentum divergence confirmed at the close of the 8:36 bar after an 8:09 CIT. We sold short at 1927.75 with a profit target at the 20 period average. It took no more than 3 minutes after entry for that target to be hit at 1926.25 giving us an early, and quick, profit of +1.50 handles.
Prices then bottomed at 1925.00 and rallied back up to the upper band and then broke lower again. When momentum turned negative at the close of the 9:03 bar we sold short again at 1926.00 with a profit target this time at the 100 period average. It took around 6 minutes for that target to be hit at 1924.25 for a gain of +1.75 handles.
This was starting off to be a really good day. We were already up +3.25 handles and we had only been in the market for less than 10 minutes on two trades!
Prices then traded down to 1921.00 where they stabilized and started to rebound just in front of a 9:22 CIT. Prices quickly recovered their ground above the 20 period average, rallied a little further up to the upper band, and then drifted lower to retest the 20 period average. When they rebounded during the 9:57 bar that was our cue to get long at 1928.25. We would have no profit target for a while on this one because prices were now moving smartly above the upper band. We were now in “trend mode”
The hardest part about being in trend mode after going through so many days where small scalps were the only way to survive the day is just sitting still. And that’s what you have to force yourself to do in situations like this. We held on to this long position for just under 2 hours until it appeared the market was running out of steam just above our Magister pivot level at 1937.75. We then took a profit at 1938.25 at the close of the 11:45 bar for a sweet +10.00 handle profit. We were now up +13.25 for the day and it wasn’t even lunch time yet (although sometimes that can be both a blessing AND a curse!).
From that point though it was back to bobbing and weaving. When prices moved back below the upper band we tried a short sale at 1938.50 anticipating a move down to the 20 period average. That one took a while, about 50 minutes or so, but finally was hit at 1937.25 for a +1.25 handle gain. We were now up +14.50 handles.
Prices had traded down into a CIT cluster at 12:37 and 12:45 and momentum turned higher just after at the close of the 12:54 bar. So we went long at 1937.75. Prices then went on to make a new high at 1940.75 and then confirmed a bearish momentum divergence at the close of the 13:33 bar. At that point we exited our long position at 1939.25 for a +1.50 handle gain and reversed to a short at that same price. Now we were up +16.00 handles for the day.
It took around 22 minutes, but just like clockwork, prices traded lower and hit our profit target at the 20 period average at 1938.25 for a gain of +1.00 handle. Now we were up +17.00 handles going into the last hour.
Once again, prices traded lower into the next CIT at 14:35 and then momentum turned higher again at the close of the 14:33 bar. So we went long again at 1938.00 thinking that maybe we might get one last surge higher up to the upper band at 1943.00. But there was just not enough time left in the day and we ended up exiting near the close at 1938.50 for a gain of +0.50 handles.
It ended up being a “perfect” day with 7 profits and no losses and a total gain of +17.50 handles. That now put us up +21.50 handles for the week.
We said yesterday when we took our first net loss after 5 straight small profit days that down days are usually followed by a streak of profits and this looks like it could indeed be the start of a new streak.
Thanks Volatility! Hopefully she’ll stick around for a while this time.