|
Feb
6: Closing Read
Strong
signal weight persists, SPY nearing the highs from 1/28 and the
87.70 area identified by the double chevrons down. Both middle
signals, short then long, achieved the +$1 target during the last
two Primary cycles. Focusing on the numbers, notice how the
extreme signal weight today has moved the Primary from +940 to +7509.
Soon, the Change will begin to diminish because the amount
of signal weight needed to keep it rising will become excessive.
If Price (SPY) continues to rise during a period when the
Change is declining, a setup for a reversal will establish itself.
At
the close notice that the change is only +3. Monday there
will be the potential setup for a reversal signal.
This
week has been ideal for readers to see how reliable the Delineator
is with respect to direction. Until the Primary changes slope,
and especially within the first day and a half of a slope change,
you can depend on the direction of the Primary. During this
time, you can also be confident that price moves against your position
will resolve back in the direction of the Primary. With this
knowledge, any number of successful trading strategies can be supported
by using the Delineator focusing on making transactions at slope
changes. Here's a review of the change
in price following slope changes over the past two months. Your
success depends on your abilities.
Feb
6: 10:45am
Extremely
strong signal weight continues to present itself as identified by
the darker green dots on the Primary. The Primary is +2100
and continues to rise. The Primary will not be considered
to be over-extended UNTIL the Change turns to negative numbers while
the signal weight is greater than +1000.
Feb
6: Opening Read
The
Primary continues to rise this morning as strongly positive signal
weight is present. The Plus a Buck strategy made its $1 profit
target this morning a few minutes after the opening.
Feb
5: Closing Read
A
reversal of signal weight from the opening half hour kept the Primary
from changing slope and issuing an exit long signal. Hence,
the up cycle is still intact and the middle long signal from 84.77
is also still intact. As can be seen below, the Primary is
now at +935 up from -8100 at the slope change up on Feb 3rd. With
signal weight at +1100 and the Change only +11 at the close, it
will take ever increasing signal weight to keep the Primary rising
for the next few days. The Plus a Buck target for the middle
long signal is 85.77.
Recall
that we are focusing on slope changes this week and how to identify
them. Scroll back down and re-read all the posts from today
taking special interest in the manner in which signal weight affected
the Slope and Change. I (me) was nearly 100% positive that
the slope would have changed at the 11am bar. Yet it did not
and the fact that it did not and the price subsequently went back
to the highs from yesterday demonstrates how dangerous it can be to
initiate a position based upon the price action during the first
hour of trading. All signals on the Primary can only confirm
at the end of any bar, never during a bar. Trading in front
of a signal can quickly put your trade opposed to the direction
of the Primary, leaving you in no-man's-land.
Feb
5: 12:30
The
Primary is back in confirmation by the Secondary as indicated by
the gray turning green on the most recent dot. Signal weight
is strongly positive and the middle long signal continues. The
double down chevrons from yesterday's high at 85.30 is resistance.
I'm
off to the gym and will be back in an hour and a half.
Feb
5: 12pm
Positive
signal weight has developed and as of this writing is close to turning
the Secondary up again. The middle long signal, which was
a bar from ending earlier, is still active.
Feb
5: 11:30am Slope change, exit long, not confirmed
The
beauty of the Delineator program is that a signal cannot confirm
until the end of a bar. Hence, if you allowed yourself to
be swayed by the price action earlier this morning and shorted in
anticipation of the signal, you'd have violated the discipline and
would be in a losing trade wondering what to do next. We don't
know what the price will do, but we do know what the Delineator
will do based upon the statistics shown in the table below as we
have been focusing on all this week. A slope change isn't
a slope change until it happens, and an enter signal isn't a signal
until it happens. The Delin. Stats window shows that for the
slope change to confirm during the current bar, signal weight needs
to be <-620.
Feb
5: 11am Slope change, exit long, not confirmed
Signal
weight rose enough during the previous bar to stay above -340 and
not trigger a slope change/exit long signal. For the slope
change to confirm this bar, signal weight will need to be less than
-370.
Feb
5: 10:30 Early Slope Change Negative (Early Exit Long
signal--since the Primary issued a middle signal, the email
will show the current signal as an exit long...which is obviously
the same as a slope change). As
expected in the previous post, an early slope change signal
has been issued which will confirm at 11am if signal weight is less
than or equal to -340. An early enter short is expected at
the 11:30 bar. The Slope needs to be -80 for the short signal
to be issued.
Feb
5: 10am
Signal
weight has turned even more negative pushing up the time when we
can expect a slope change and short signal. With the Slope
only +5 and the Change -85, we can expect a slope change this bar
or next for sure and a short signal within a hour or so...but very
soon.
Feb
5: Opening Read
The
Primary is now starting to turn over if signal weight remains negative
today. Estimating when this will happen, about 1 hour (Slope/Change=
118/70=1.6 bars). We can expect a slope change then and an
early enter short within a bar or two later depending on signal
weight. If issued, the short would be a pure signal.
Feb
4: Closing Read
Today
was a classic example of why middle signals aren't worth your time compared
to pure signals. Let's focus on what is important :WATCHING
FOR THE NEXT SLOPE CHANGE. Now that the Change is a negative
number, we can divide the Slope by the Change (remember this from
yesterday?) to estimate how many bars until the next slope change
which would most likely be accompanied by a new short signal. 192/50=
3.84 bars or just under 4 hours of trading...mid-day tomorrow.
And
this is the POINT: focus on being able to predict the motion
of the Primary. Slope changes have the greatest profit potential
as reversals in price action following a slope change are very reliable.
If you are new to the Delineator Journal, read the Archive
section and just look for slope changes in the charts and the successful
trades that followed. The average point gain either up or
down within one day of a slope change is 3 points.
Summarizing:
We will know within 1 hour tomorrow if we are going to get
another slope change and a new short signal. And of course
if you had the Delineator running on your machine you would be assured
of seeing this unfold in real time.
Feb
4:
Early Enter Long, Long Signal Confirmed at 10:00, SPY 84.77
The
Enter Long signal was confirmed at 10:00 at SPY 84.77 . If
signal weight drops below 760, the long signal will drop out of
confirmation but will still be a valid signal. The loss of
confirmation is another risk to middle signals. If you are
taking this signal for the Plus a Buck strategy, place a GTC sell
at 85.77.
NOTE:
I will be gone for the rest of the day as I have appointments.
Feb
4:
Opening Read
Signal
weight of only +760 turns the Secondary up and this would generate
a middle long signal. Readers will recall that middle long
signals work only 50% of the time and are not as reliable as pure
signals. The Primary cannot change slope today.
Feb
3:
Closing Read
The
slope change this morning ended the short signal and as the Secondary
was down, no long signal was generated. With the Primary at
-6325, the current up cycle should last at least 1.5 more days.
There is the possibility of a slope change up on the Secondary
tomorrow which would generate a middle long signal. We won't
know the signal weight required until just after the opening on
Wednesday.
Feb
3:
2:45pm
The
Primary continues to rise from the slope change earlier this morning.
Signal weight is moderate at +777. As the slope of the
Primary is positive, expect the recent lows to hold and resistance
at 84.17 and 85.28.
Feb
3:
1:00pm
A
personal note: I typically only trade the pure signals or
big "balloon underwater" setups. So with neither
present, these neutral cycles are an off time where I really don't
watch until the end of the day.
Here
are the numbers for 1pm
Feb
3:
11:30 SLOPE CHANGE CONFIRMED (exit short signal)
The
Slope change has confirmed and the Delineator is in a neutral up
cycle for the 'Plus a Buck" strategy (not confirmed by the
Secondary). It will take negative signal weight of -1420 to
reverse the Slope during this bar, and as of next bar it will be
impossible for the Slope to change again for at least 1 full day.
Feb
3:
11:00 EARLY SLOPE CHANGE (early exit short)
We've
just watched as the early slope change signal has come in. This
signal will confirm at 11:30 as long as signal weight stays above
-180. We know this because the Delineator Stats window determines
the needed signal weight to confirm any signal (window to large
to post here).
Feb
3:
10:45
Early
slope change next bar, right? Right! See how the Change
is greater than the Slope? Remember, signals can only confirm
at the END of a bar.
Feb
3:
10:30
We
can see that signal weight has again turned negative. Based
on these numbers, when will the slope change occur?
Feb
3:
10:15
When
do you expect the slope to change now? If you said "next
bar" you are correct (79/67=1.17 each unit is a half
hour)
Feb
3:
10:00
Signal
weight has again turned negative and hence it will take longer for
the slope change to occur this morning. Again, we're watching
specifically for slope changes this week and how to predict them
based upon the data provided by the Delineator shown in the table
below. Based upon the data at 10am, dividing the Slope by
the Change (146/38=3.8) 3.8 bars is almost 2 hours from now. If
signal weight turns more positive, it will occur faster.
Feb
3:
Opening Read
Notice
that the Slope is now -83 and the Change is +104. If the signal
weight stays where it is currently, we will get an early slope change
next bar: if you add the Change to the Slope you get a positive
21 for the next bar which will generate an Early Slope Change positive.
9:45am:
fading
at
the opening:
Feb
2nd:
Closing Read
No
slope change today but we did see the Slope move from -592 to -186.
Any positive signal weight tomorrow will turn the Primary
up and we'll be able to see the slope change as it happens. Given
the fact that the Secondary is negatively sloped, we will not get
a long signal.
Feb
2nd:
3:30pm
Here
are the numbers for the 3:30pm bar:
You
can see with the Slope at -189, we're finally getting close...tomorrow
a slope change is most likely.
Feb
2nd:
2:30pm
Here
are the numbers for the 2:30 bar:
We
can see that despite the brief run-up in price, there we never got
even close to seeing a slope change with the Slope= -252. The
Change on the bar of +7.7 is also diminished from prior levels.
The Primary is -7426 and still declining. No slope change
today, but tomorrow possibly.
Feb
2nd:
12:30pm
Here
are the numbers for the 12:30 bar: (I'm off to the gym, back in
1.5 hrs)
Feb
2nd:
12:00
Here
are the numbers for the 12:00 bar:
Feb
2nd:
11:30am
Here
are the numbers for the 11:30 bar:
Feb
2nd:
11am
Notice
how the change in signal weight from -802 to -1300 cut the Change
in half from the 10:30 posting. Also, look at the Primary's
value at 10:30. If you add the Slope's value to the previous
Primary value you get the new value for the Primary ( -4260 + -499
= -4760). Now you can see how to predict the next bar's value for
these important numbers. We can also see that unless signal
weight turns into a positive number, we won't be in a position to
get a slope change on the Primary until tomorrow.
Feb
2nd:
10:30am
Signal
weight continues to become less negative causing the Change to rise
faster from earlier in the bar. But we're still hours away
from a slope change, but hopefully you're seeing the process begin
to unfold. Remember this week we're focusing on learning about
slope changes on the Primary (read opening comments Feb2)
Feb
2nd:
10:45am
Positive
change on the period continues to rise. If one were to predict
when the Slope would get near zero with the current rate of Change,
divide 553 (the Slope number) by 37 (the Change number) to
get 14 bars or 7 hours (each bar is 30 minutes). So if signal
weight were to stay where it is currently, it would take 7 hours
to turn the slope to zero. And of course if signal weight
went to, say, +600, the Change would be a big positive number and
the Slope would be zero sooner.
Feb
2nd:
Opening Read
For
this next week, the Delineator Journal will focus primarily on slope
changes and how to use the software to predict when they will occur. As
readers over the past several weeks have seen, profits can be extended
by being able to predict price reversals that typically come when
the Primary is fully extended and must change direction. A
three to five percent reversal in SPY is common after such
slope changes. Setting trading strategies during these periods
can be especially profitable.
To
do this we must learn how to read the data provided by the Delineator.
Looking below, we can see the values of the Primary, SW, Slope
and Change. What is important to see is that with signal weight
at -1700 (extreme), the slope is -592 and the change on the last
bar is +8.3. What is this telling us? With the change
being positive on the bar, this tells us that the Delineator has started
its process of reversing. Hence the likelihood of any further
sustainable declines in this cycle is diminishing.
So we need to keep our eyes on the Slope number and wait for
it to get to -150 or so. At that point it is within an hour
or so of a slope change.
9:45am:
This morning the Primary is continuing to decline with strongly
negative signal weight. However, notice that the change on the period
is a positive number. For this number to turn negative, even
stronger negative signal weight is needed. Any reversal in signal
weight will make the Slope rise, but at this point we're not close
to a slope change. For that to happen, the Slope number needs
to be -100 or less and the Change +50 or more.
|
