The S&P has been a difficult market for my methodology. I look at:
- Stats to identify when a timeframe is overbought or oversold. The fact that a market is overbought does not mean I should go short; it means that it is a high risk long until the higher timeframe swing corrects.
- The material in Nature of Trends for patterns that define the end of trends and corrections.
- The Ray Wave to provide a road map to the swing structure. This helps identify when a change in trend or end of correction is likely.
- Stats to provide a price and time window when the change in (3) has a high probability of occurring.
- Ratio analysis to provide a price and time window when the change in (3) has a high probability of occurring.
- Linear cycles to augment (4) and (5)
- Sentiment indicators to warn of excessive optimism or pessimism.
The tools have been not only saying a buy is a high risk, the volume and price analysis have been indicating a major correction is likely – but the S&P has continued to ground up.
Last night the traditional Market Profile gave us a Neutral Day Closing in the Bottom Quadrant topping setup and trigger. As long as the high of yesterday is not taken out, then we can expect to see a correction. The problem is I have no idea whether the correction, if it occurs, is of a 1-day, 5-day, 18-day or 13-week magnitude because I have no swing change in trend patterns on which to rely. This means that I shall stand aside until something develops.
FIGURE 1 Neutral Day