Trading System
Our trading system is based on proprietary analysis of market internals, combined with price analysis of $SPX $NDX $RUT to identify major market moves. When we say market internals, we mean specifically:
For price analysis, we focus on price levels and cycles.
Terminology
LRHR Setup: Low Risk High Reward setup. All trades should be based on LRHR setups.
ST: short term. Example of recent ST trade: capture Bounce5 from 5/14 to 6/3.
MT: medium term. Example of current MT trade: capture most of current bear market rally, which started on 3/23/20.
QT: quick trades. QT can be one-day trade or one-overnight trade. The idea behind QT is to lock in profits quickly with frequent exits.
Therefore QT don't require the same stringent conditions behind the LRHR setups for ST trades. But because of this, the magnitude of the QT move may not be as big. Therefore, so you should consider small positions with tight stops for QT trades.
Market breadth: We use NYSE and Nasdaq Advance Decline Issues (A/D) Index the primary measure of market breadth.
Advancing Issues: stocks that are rising
Declining Issues: stocks that are falling
NetValue = TotalAdvancingIssues - TotalDecliningIssues
If NetValue is positive, we refer to it as “net advancing”
If NetValue is negative, we refer to it as “net declining”
Read here for more on Advance Decline Issues.
Timeline
Our trading system is based on proprietary analysis of market internals, combined with price analysis of $SPX $NDX $RUT to identify major market moves. When we say market internals, we mean specifically:
- Volatility ($VIX $VXN)
- Market breadth: NYSE and Nasdaq Advance Decline issues
- CBOE Equity Put/Call Ratio
- NYSE and Nasdaq % of stocks above their 200-day moving average
- Spot VIX contango value
For price analysis, we focus on price levels and cycles.
Terminology
LRHR Setup: Low Risk High Reward setup. All trades should be based on LRHR setups.
ST: short term. Example of recent ST trade: capture Bounce5 from 5/14 to 6/3.
MT: medium term. Example of current MT trade: capture most of current bear market rally, which started on 3/23/20.
QT: quick trades. QT can be one-day trade or one-overnight trade. The idea behind QT is to lock in profits quickly with frequent exits.
Therefore QT don't require the same stringent conditions behind the LRHR setups for ST trades. But because of this, the magnitude of the QT move may not be as big. Therefore, so you should consider small positions with tight stops for QT trades.
Market breadth: We use NYSE and Nasdaq Advance Decline Issues (A/D) Index the primary measure of market breadth.
Advancing Issues: stocks that are rising
Declining Issues: stocks that are falling
NetValue = TotalAdvancingIssues - TotalDecliningIssues
If NetValue is positive, we refer to it as “net advancing”
If NetValue is negative, we refer to it as “net declining”
Read here for more on Advance Decline Issues.
Timeline
- The current Bear Market started on 2/20/20.
- The 1st major down segment is called Dive1. This started 2/20 and lasted until 3/23.
- After Dive1 came the bear market rally that started on 3/23.
- So far this rally consists of the following bounces.
- Bounce1: 3/23-3/31. Bounce2: 4/3-4/17. Bounce3: 4/21-4/29. Bounce4: 5/4-5/12. Bounce5: 5/14-5/28.
- Bounce6: 5/29 - 6/8. Bounce7: 6/15-6/23. Bounce8: 6/29 - 7/7.
- Most bounces consist of 4 thrusts (sub-segments) before they end. These thrusts are most visible on the 5-minute charts.
- Each thrust in price is like a rubber band getting stretched out. In between each thrust, price needs to snaps back to a key support level on the 5-minute chart to bring in new buyers.
- Likewise, in between each bounce, price needs to snaps back to a key support level on the hourly charts to bring in new buyers.