For over a year now, I have been writing about investor sentiment, using time and then combining that with regular technicals and price for high odds swing trade set ups. This 4 check swing trading formula is going to become even more important moving forward.
Liquidity is drying up which is going to start producing more volatility. The more volatility in the market, the less “programmed trades” will be seen. They don’t run in volatile markets, only low volatile markets. All of that is going to lead to exaggerated moves in both directions. The key moving forward soon, is going to be anticipating these wild swings. That is where the 4 check swing system is going to be very important to follow.
Time is the #1 factor in the system. If you don’t know when to anticipate the reversal, you are going to get yourself in trouble. Just using technical analysis will produce false trade signals. We have seen that happen- where bears would be calling a top because of bearish divergences, only to see that divergence extend much longer than anticipated.
But when you see bearish/bullish divergences and there is a specific turn date pending, that is an actionable and most likely profitable trade set up. We have a turn pending and there is also a “black hole” due in the 3rd quarter. The last “black hole” we saw-produced 480 SPX points-down and then up in September 2014. The next “black hole” may be even more severe. Swing trade system example is below-on 06/11/15, produced 90 SPX points in 5 trading days
1.) Time: 06/11/15 Report Market Energy for this week suggests some Weakness on 6/12 and also into 6/15. The FOMC vibrations should be friendly and a positive drift higher.
2.) Sentiment reached 91% bullish extremes
3.) Technical divergences on the short term charts
4.) Open gap target for the reversal
