Commentary

Stabilization

SPY Daily

Turned out Monday was so bad it was good. A 2% drop early in the week is about the best buy signal there is to make quick money. Finally, a yellow candle was produced today.

The decline was contained by the 72 day moving average. This pattern looks quite bullish but forgoing several days of excellent gains is a heavy price to pay for new longs here.

The chart is different than usual. Four momentum indicators are included that produce very similar histograms. any of these could be used to construct a trading system. The linear regression slope strategy had a green bar today which is a buy signal in the strategy discussed here previously. The other strategies have below zero readings but all are rising. The linear regression slope strategy has done quite well lately, it gives buy signals earlier.

I’ve done more serious research into the rate of change strategy. Buying TwoDown (blue) is actually the most profitable way to play the game over about 24 years. In this particular case, however, that trade would have lost 7.76 per share.

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