Traders' Library Blog

Stocata S&P 500 Analysis: September 27, 2014.

Last week I wrote: 
In my last week comment I wrote: "The index went with the lows on Monday and Tuesday a fraction lower, close to the 50 day average and the PP pivot support of the month. But that was it. Tuesday and the rest of the week was an up move, with a new up wave creating top wave 3.18. The nineteenth top in a row. Where will it end? We must now expect a further move up to the upper side of the volatility channel, the upper side of the up moving pitchfork and the R1 pivot resistance level of the month. Targets are 2030 to 2050. It looks like the long term reaction down is again postponed".

Is the start of the long term down reaction already back? The spinning top on Friday of the week before was confirmed on Monday with a larger negative candle. The index was falling back to the level of the PP pivot of the month, the 50 day average, the median line of the up moving pitchfork and the previous 161.8% Fibonacci target now giving support. What we can expect is a further move down to the 100 day average and the low side of the volatility channel. If there is a further down move, we must expect the index to move to 1900, the 200 day average, in about 3 weeks time. Friday brought an up correction closing the week above the 50 day average. This may be a logical correction because the index reached the 50% retracement since the start of wave 3.17.  We are still in a long term uptrend, meaning we should not exclude a new higher high top wave 3.19. Fibonacci projections point to 2050 as the most expected value. Better wait and see what is coming next week before doing any trades.

Sylvain Vervoort  http://stocata.org/

Stocata S&P 500 Analysis: September 20, 2014.

Last week I wrote: 
In my last week comment I wrote: "Most logic next step is a correction down to 1970, the PP pivot level of the month and the 50 day simple moving average. Keep in mind that we made the eighteenth higher top in a row. You must be prepared for a longer term reaction, probably within a number of weeks". This comment is still valid for the coming week. The past week the index made a first step with a pullback reaching the low side of the BBS channel, finding support at the level of the previous tops 3.15-3.16. I assume this support will be broken the coming week with the index falling back to the PP pivot level of the month, the 50 day average and the median line of the up moving pitchfork.

The index went with the lows on Monday and Tuesday a fraction lower, close to the 50 day average and the PP pivot support of the month. But that was it. Tuesday and the rest of the week was an up move, with a new up wave creating top wave 3.18. The nineteenth top in a row. Where will it end? We must now expect a further move up to the upper side of the volatility channel, the upper side of the up moving pitchfork and the R1 pivot resistance level of the month. Targets are 2030 to 2050. It looks like the long term reaction down is again postponed.

If you have doubt about BBS, have you noticed that the BBS Band Break System used on the weekly chart, took a long trade August 17 2012 at 1418.16 and with a closing at 2010.4 on September 19, 2014, there was a profit of 592.24 or 41.7%.

Sylvain Vervoort   http://stocata.org/

 

Exploring Charting Techniques Part 3: Creating a Trading strategy

Creating our own indicators and turning them into a trading strategy is something all technical analysts strive to do. Unfortunately, a lack of programming skills can often discourage us from accomplishing this. But there are ways to get around it. Here’s one way to create and backtest an indicator without writing any code.

If you are a devout reader of Stocks and Commodities magazine, then I can confidently say that you likely have your own ideas for creating custom indicators and turning standard and custom indicators into a trading strategy. Ideally, these ideas would first be backtested on historical data and possibly run in full autotrading mode. Wouldn’t that be magnificent?
Of course, having an idea is one thing, but turning it into an executable piece of program is a different ballgame. In this article, I will create a combined indicator and a backtesting  strategy, and I will do this without using a programming language.

The basic trading idea

First, please note that the purpose of this article is to provide an example of one way to create indicators and trading strategies without writing programming code. Thus, the  indicators and strategies shown here are for educational purpose only. I’ll start with the basic strategy idea, one that I’ve already used before; namely, the crossing of two specific moving averages. The first and faster average is the simple moving average of the typical price. The typical price is the high + low + closing price divided by three. The second average is a simple moving average of heikin-ashi recalculated prices, or haOpen + haHigh + haLow + haClose divided by four. In the first part of this article series on charting techniques in the July 2014 S&C, I presented the modified renko chart. This kind of chart filters out most of the noise found on standard fixed-time-related charts resulting in clear up and down moves and turning points. When you apply moving average crossovers on this type of chart, it will produce less losing trades than the commonly used fixed-time-related charts. In Figure 1 you see a 100-tick (one-point) modified renko chart of the S&P 500 index. I have added the eight-bricks simple moving average (SMA) of the typical price in blue and the eight-brick SMA of the heikin-ashi price in orange. Both are calculated on the renko bricks. Note the green buy and red sell signals produced by the crossovers of the two averages. Is this a profitable system? Can it be improved? Although you can find the answers to these questions using historical data, you still need to create the indicators and a trading strategy.

Stocata S&P 500 Analysis: September 13, 2014.

Last week I wrote: 
"Last week I wrote: "Basically I would now expect some pullback to create a reaction wave 2, possibly after first a limited continuation of the up move (2010?). My expected minimum retracement level is 1970. This may take more than one week". We got the limited continuation of the move up to 2011 followed by a reaction, but closing the week at 2007.7. Shall we have a pullback correction wave 2 next? With 2011, the index reached a Fibonacci target at 261.8%. Most logic next step is a correction down to 1970, the PP pivot level of the month and the 50 day simple moving average. Keep in mind that we made the eighteenth higher top in a row. You must be prepared for a longer term reaction, probably within a number of weeks."

In my last week comment I wrote: "Most logic next step is a correction down to 1970, the PP pivot level of the month and the 50 day simple moving average. Keep in mind that we made the eighteenth higher top in a row. You must be prepared for a longer term reaction, probably within a number of weeks". This comment is still valid for the coming week. The past week the index made a first step with a pullback reaching the low side of the BBS channel, finding support at the level of the previous tops 3.15-3.16. I assume this support will be broken the coming week with the index falling back to the PP pivot level of the month, the 50 day average and the median line of the up moving pitchfork.

If you have doubt about BBS, have you noticed that the BBS Band Break System used on the weekly chart, took a long trade August 17 2012 at 1418.16 and with a closing at 2003.37 on August 29, 2014, there was a profit of 585.21 or 41.2%.

Sylvain Vervoort  http://stocata.org/

Stocata S&P 500 Analysis: September 6, 2014.

Last week I wrote: 
"No double top, no downward reaction, but closing a bit higher in a week with limited moves. We are now closing above the 2000 level with 2003.37. With 2003 we reach a Fibonacci target level. Basically I would now expect some pullback to create a reaction wave 2, possibly after first a limited continuation of the up move (2010?). My expected minimum retracement level is 1970. This may take more than one week".

Last week I mentioned: "Basically I would now expect some pullback to create a reaction wave 2, possibly after first a limited continuation of the up move (2010?). My expected minimum retracement level is 1970. This may take more than one week". We got the limited continuation of the move up to 2011 followed by a reaction, but closing the week at 2007.7. Shall we have a pullback correction wave 2 next? With 2011, the index reached a Fibonacci target at 261.8%. Most logic next step is a correction down to 1970, the PP pivot level of the month and the 50 day simple moving average. Keep in mind that we made the eighteenth higher top in a row. You must be prepared for a longer term reaction, probably within a number of weeks.

If you have doubt about BBS, have you noticed that the BBS Band Break System used on the weekly chart, took a long trade August 17 2012 at 1418.16 and with a closing at 2003.37 on August 29, 2014, there was a profit of 585.21 or 41.2%.

Sylvain Vervoort   http://stocata.org/