Spot the Bear. Weekly chart analysis of S&P500

romik · Mar 12, 2016

DDR said:
Well really there is no foreseeing is there, only once price crosses a trend line and sma on a higher time frame then the lower time frame is in that trend. trade accordingly then long or short.
Then there are reversal signals a whole other discussion

OK. Let's have a hypothetical example. Daily bar closes below rising trendline, then some days later it closes below 70 SMA and you go short, where is the stop and where is the target?

Spectre2007 · Mar 12, 2016

you can test historically by looking at what happened before, the 200 day MA is the best for long term position players and few year signals, but the 50 day MA is ideal for those who need to trade more frequently.

romik · Mar 12, 2016

Spectre2007 said:
you can test historically by looking at what happened before, the 200 day MA is the best for long term position players and few year signals, but the 50 day MA is ideal for those who need to trade more frequently.View attachment 162865

So why the need for all those trend lines at the end of the chart?

Spectre2007 · Mar 12, 2016

romik said:
So why the need for all those trend lines at the end of the chart?

those are for day trading.. swing trading looks for fewer signals from the daily.. day trading fine tunes S/R placement.

romik · Mar 12, 2016

Let's forward test it. So now we would be long from where and where would be stop, 50ma signal, 1:1 payout using ES?

Spectre2007 · Mar 12, 2016

romik said:
OK. Let's have a hypothetical example. Daily bar closes below rising trendline, then some days later it closes below 70 SMA and you go short, where is the stop and where is the target?

no you don't go short, you wait for range expansion to the downside. Price will stop and retrace, and thats when you enter market (short). You calculate the current low, and wait for retrace as close to the 70 days SMA as possible, a filter is, its not a valid short till the 200 day MA crosses also. So a short shouldn't be taken, unless the 70 day is below 200 day.

lets say 70 days SMA is at 1930, 70 day is below 200 day. (shorts valid).

price is below the 200 day. price is below 70 day..@ 1920 (current low is 1802), R:R 1:1

1920 - 1802 = 118 points

stop loss 118 points

1920 + 118 = 2038

this is if you truly believe that the 70 day below 200 day implies a downward trend.

Spectre2007 · Mar 12, 2016

romik said:
Let's forward test it. So now we would be long from where and where would be stop, 50ma signal, 1:1 payout using ES?

for a true valid long signal the 50 day needs to be above the 200 day.

but if your trading simply off the 50 day..

50 day = 1930
200 day = 2012

price is at 2012

high = 2012

if your stop loss dollar value is constrained to 1500 and trading 1 contract = 30 points ES

so entry is 2012 - 30 = 1982
stop loss is 1982 - 30 = 1952

romik · Mar 12, 2016

I don't get that. Must be me. It's not for me anyway.

Anyhow, this is not relevant for the purpose of the thread. I am interested in other poster's views whether macro is bullish or bearish, how we trade around it is a personal thing.

i960 · Mar 12, 2016

Spectre2007 said:
the reason it works is in a trending market, (index above 50 day SMA), the price variance from the high on average would not exceed 60 points. (30 points for entry from high) and (30 points from entry to stop loss)...

And we have a winner. Guys the reason the "mean reversion" against an SMA method works is simply because the market is trending and trending markets almost always have rotations, retracements, and continuations within the trend itself. The SMA is simply **reflecting** that. The fact that the market is trending is the more important underlying driver.

It's not that the method is useless or bad but there's no grail in that SMA - it's just a guide.

eganon69 · Mar 12, 2016

romik said:
OK. Let's have a hypothetical example. Daily bar closes below rising trendline, then some days later it closes below 70 SMA and you go short, where is the stop and where is the target?

I think the question is flawed. Why would you ever go short on a RISING trend line. By definition if you have a RISING trend line and a shorter MA above a longer MA that is an UP trend. You would assume that is a reversion to the mean and go LONG.