Signals & Trading Plan for Monday 6/17/19

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Here is an excerpt from our trading plan.

We are in Surge4, not Surge1
There’s something that has been bothering us.  

$SPX $NDX $RUT started an Up Trend on 12/26/18, and had been marching up steadily with Dip1 on March 4  and Dip2 on March 21.  These are typical dips in an Up Trend, shallow and lasted only a few days.  

When the bigger sell-off happened in May, we labeled it Down Trend.  But that term bothers us, because that sell-off lacked the characteristics that typically accompany real Down Trends.  It didn’t last as long as the Down Trend from 10/4/18 to 12/24/18. It didn’t drop as far as that Down Trend either. It didn’t have the kind of patterns for volatility and A/D lines that confirm it’s a real Down Trend.

To call the May sell-off a Down Trend is misleading, because it implies that the rise in price for $SPX $NDX $RUT since June 4 is a new Up Trend.  And as a new Up Trend, it has the potential of lasting for quite a while, and rising substantially.  This is not the case.

In fact, based on the cycles defined by our trading system, which relies on volatility and other market internal indicators, the sell-off in May is exactly that.  We’ll call it SellOff to signify that is is a medium size retracement in an Up Trend.  It is bigger than a Dip, which is just a small retracement.   What happened in May though was not a Down Trend.

So as of now, we are in Surge4 of the Up Trend.  It is important to make this distinction because we are now working with the assumption that this is not a fresh new Up Trend that can last for quite some time.  Instead, our trading system is telling us that this Up Trend that started on 12/26/18 is about 60% done.  It can still last another 3-4 months, but most likely not beyond that.   

The rest of this article covers:
Market internals
Dip4: support and resistance levels
Trading plan
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