I'll bite again on Wednesday regarding the upside of the indexes on any signs of strength. What would they be? A few examples:
1. The S&P is stronger (or less weak) than the Dow on a percentage basis. One full S&P point equals roughly eight Dow points. If the Spoos were down 25 and the Dow down 200, that would be approximately parity. It would be bullish for the Spoos, if they were down 10 while the Dow was down 200. It would be bearish for the Spoos, if they were down 50 and the Dow was down 200. That's the rough idea.
2. If the indexes trade north of the opening price for at least nine out of first twelve 5-minute bars and the most recent close is greater than the open, I would consider that bullish.
3. Again as before, a lower opening will make a better potential setup than a higher one. The second part of that setup is that the market then has to rally. Granted, that idea failed miserably on Tuesday, but with each dramatic market plunge, we're indisputably getting closer to the next rally. As with Tuesday, once I enter at relatively high levels on the day, I would then use the day's lows as stops.
If you're less adventurous, consider buying the 5-year note.
Either-Or Biases The first set of biases includes six biases that individually signal either long or short on a daily basis, except for the rare tie. Each bias has a +1 value for long bias, and a -1 for short. The bottom line is the sum total, which can range from -6 to 6. Positive totals are bullish; negative are bearish. For bullish signals (opposite is bearish):
- The 2-day average is below the 5-day average.
- The close is above the 40-day average.
- The highest close of the last 50 days occurs before the lowest close of the last 50 days.
- The day's trading range is smaller than the 10-day average range and the day's close is higher than the 10-day average close OR the day's range is larger than the 10-day average range and the close is lower than the 10-day average close.
- The close is above the midpoint of the average 15-day range. (The 15-day high average plus the 15-day low average divided by 2.)
- Fade the majority direction of the last three open-to-closes.
Infrequent Biases
The five infrequent biases are listed below. For bullish signals (opposite is bearish):
- Four successively higher closes were followed by yesterday's down close. Today's action was irrelevant.
- Five successively lower closes were followed by today's up close.
- CUP trade. For the last three trading days, the middle day had both the lowest low and the lowest close. In addition, the low on the middle day must also be lower than the lows from the previous three trading days before the middle day. (CAP is the reverse and bearish.)
- The highest low minus the lowest low of the last three days is less than or equal to 20% of the highest high minus the lowest low of the last three days.
- For the previous two days, the market closed lower than it opened.
Calendar Biases
The calendar biases in the indexes are listed below. For a more in-depth explanation of these, click here.
Click here for the TradeStation summaries of all 14 futures biases.
DISCLAIMER: It should not be assumed that the methods, techniques, or indicators presented in this column will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented in this column are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The author, Tiger Shark Publishing LLC, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
Art Collins is the author of Market Beaters, a collection of interviews with renowned mechanical traders. Much of Art's TigerSharkTrading.com material will be expanded upon in his upcoming book that is scheduled to be released later this year. E-mail him at artcollins@ameritech.net.
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