S&P 2012-05-07

BarroMetrics Views: S&P 2012-05-07

The price action this morning (HK time) was interesting enough to warrant my postponing the planned article.

Figure 1 shows that the E-mini, June (ESM2), gapped down from a close of 1362.50, opening at 1354 (8.50 points).

Moroever, the ESM2, if it accepts below 1352.50 raises the possibility of an 18-day Swing, Change in Trend Pattern. If that signal is given, the minimum target would be the 13-week line change price at 1303.03. Note that this price will tend to lift at the end of each week.

So what has to happen for the Change in Trend Pattern to invalidated?

Figure 2 provides the answer: all we need to see is an ESM2 DAILY acceptance above 1361. This would provide a buy signal for a move to at least the Primary Sell Zone, 1411.25 to 1419.75. (Figure 2 is a 290-min chart so as to better show the zones).

However, given the context, I rate the greater probability of be the sell signal. That being the case, if I am not short, where would I be looking to take a trade today?

Figure 3 is the 60-min chart. It shows that the resistance zone, 1367 to 1363 ought to hold if a Change in Trend is to occur. Now this level is above the critical zone of 1361. So if I take a trade at 1367 to 1363, I would need to see a strong close BELOW 1361 to hold the position.

es-18d.png

FIGURE 1 18-day ESM2

es-290min.png

FIGURE 2 290-min ESM2

es-60min.png

FIGURE 3 60-min ESM2

5 thoughts on “S&P 2012-05-07”

  1. Hi Ray,
    Is Daily 52-week “New High – New Low” Chart
    1) Good leading indicator for S & P 500 ?
    2) Good confirmation of bull or bear market ?
    3) How about if there is a divergence signal ?

  2. Hi Paul

    For me this is merely a substitute for a 12-month swing. Whether or not it is a leading or confirming indicator depends on the context.

    As for the divergence signal….I don’t use this indicator. But I suppose…

    A divergence signal for new highs (i.e. the S&P makes new highs but there is no corresponding new 52 week high)would (if all things are equal) be a sign of weakness.

    But that said, since I don’t use it, don’t take my word for it. I’d research it for yourself.

  3. Hi Ray,
    It is interesting that you highlight that “Whether or not it is a leading or confirming indicator depends on the context.”

    But, not many trading coaches have highlighted the importance of the conscious awareness of context during trading.

    Many traders will faithfully apply the trading indicators/methodologies without reference to the context at all.

    So, could I assert that one of the main reasons most traders fail is because they blindly trade without looking at the context?

    But what are the minimum things to be considered in context?
    1. Market volatility?
    2. The phase of bull/bear cycle?
    3. Market sentiment?
    4. Major news/events?
    5. Sector & group influence?
    6. Volume patterns?
    7. …

    If my assertion is true, your enlightenment during your talk “Why Most Traders Fail and How You Can Join The Successful Elite” at Traders Round Table on 22 May 2012, would be much appreciated! 🙂

  4. Hi Paul

    Not sure if context is the reason why most fail.

    For me context is anything that provides a background perspective to the instrument I am trading. Given that each of us will have different personalities, I’d expect we’d use different tools to look at context.

    Yes, I’ll be covering some of the tools I use at the TRT talk.

Leave a Reply

Your email address will not be published. Required fields are marked *