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This week we turn our attention back to everyone's favorite market, the intraday S&P500. Below is a 60 minute chart:
The cyan line is the Cycle Forecaster, known 7 bars ahead of time. Notice how well it has been calling this market. It correctly forecast the big decline beginning on 5/19, most of the 6/1-6/8 rally, and all of the following decline. The 5/27-6/3 forecasted rally actually turned out to be a small inversion, but if you look at the turning points in the forecast during that middle period you will see how nicely they were aligned with price. Let's a closer look at what happened Friday:
This is a 10 minute chart and shows another view of the Cycle Forecaster. Notice that the S&P dropped 20 points when the 10 minute forecast turned downward to line up with the 60 minute. When two separate cycles line up, it is a very good time to start shopping for a trade. If you have been following these pages, you will recall last week's real time Coffee short that was also based on two forecasts lining up together. That trade has an open profit of around $4000 at the time this is being written.
Of course, the Cycle Forecaster only sets the stage for a trade. It is up to the other indicators to pull the trigger or the plug on the analysis. There were three separate confirmations of the sell signal on Friday. The first was a MA_Momentum divergence signal, generated when price made a higher high that was not confirmed by the indicator. This is divergence "2" on the chart. At the same time as this divergence signal was forming, MA_PivotsTrend went negative and price broke through one of our automatic trendlines. The tools were unanimously calling for a short position, and there was no reason not to listen to them. The result was a big drop and a nice 10-15 point profit.
More next week. Stay tuned.