Rich Trend Trader's Blog

October 13, 2010

Staying Long With More Upside Likely – BUY Signal Still Valid

Filed under: Trend Timing Model — Rich Trend Trader @ 9:10 pm

The S&P400 closed below its upper Bollinger band (20,2) limit and I am therefore staying long for more upside based upon the following information:

I have been looking again at historical data for the technical conditions that signal the possibility of the end of a particular rally.  I have found consistently that a close above the upper Bollinger band (20,2) limit for both the S&P600 (small cap) and S&P400 (mid cap) signals the likelyhood of rally top.  NOTE: I have found many indications that even with the closing requirments and 5-Day RSI above 85 a significant correction is not neccessarily right around the corner.  That is, a significant correction off of a rally top like that since late Aug or early Jul (depending upon your perspective and investment timeframe) is always preceded by the S&P600 and S&P400 closing above the upper Bollinger band (20,2) limit but not every close above this limit leads to a significant correction.

I am using many EW counts that have shown some consistency with the current rally that now indicate a level in the 1200-1250 range on the S&P500 as the likely top of the current move.  Past instances indicate that the rally may end right after 1 – 3 days of the S&P600 and S&P400 closing above the upper Bollinger band (20,2) limit and in other instances there is a small correction (~5%) before a final move to a top.  This final move to a top typically does not subsequently close above the upper Bollinger band (20,2) limit.  This may indicate a wave 3 end where the markets exhaust themselves technically over the upper Bollinger band (20,2) limit with a small wave 4 correction and a final move up for a wave 5.  For this reason, I am not going to short the market until I get a trend model SELL signal or see this wave 3-4-5 type action (with a subsequent close below the previous 5-Day low on the S&P600 and S&P400) rather just exit longs into CASH after the close above the upper Bollinger band (20,2) limit.

DISCLAIMER: https://richtrendtrader.wordpress.com/disclaimer-on-information-presented-in-this-blog/

October 4, 2010

Still Looking for a Move Above the Upper Bollinger Band Limit to take Profit

Filed under: Trend Timing Model — Rich Trend Trader @ 5:28 pm

Trend model BUY signal is still valid but have been looking for a close above the upper Bollinger band (20,2) limit on at least one of the S&P600, S&P400, S&P500 with all indices 5-Day RSI above 75 to take profits.  Any pullback prior to this occurance will most likely not result in a trend model SELL signal.  EW blogs that I follow are now looking for anything in the 1170+ range on the S&P500 prior to a more significant correction that may be tradeable on the short side should a SELL signal be issued.

DISCLAIMER: https://richtrendtrader.wordpress.com/disclaimer-on-information-presented-in-this-blog/

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