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DIVERGENCE ON THE SPOOS aka Emini SP

by spooman on Jan 27, 2009

This is exactly what we do at RSKsys for testing divergence on the Spoos.

RSKsys Divergence

DPO = Detrended Price Oscillator

There are several types of divergence we can track between data feeds and the DPO.

SPOOS & DPO

SPOOS & VIX OR TRIN & DPO

SPOOS & ADSPD & DPO

SPOOS & DPO

Short Trades

Here we compare the highs of the spoos to the highs of the DPO. If we get a higher high on the spoos but a lower high on the DPO it implies weakness and possible short trade.

Long Trades

Here we compare the lows of the spoos to the lows of the DPO. If we get a lower low on the spoos but a higher low on the DPO it implies weakness and possible long trade.

SPOOS & VIX OR TRIN & DPO

Any reference to the Vix can also be applied in exactly the same with to the Trin.

Short Trades

Here we compare the highs of the spoos to the lows of the Vix and the lows of the DPO.

There are 3 possible forms of divergence when using the Vix.

#1

90% of the time

If we get a higher high on the spoos and a lower low on the Vix but a higher low on the Vix DPO it implies weakness and possible short trade.

#2

5% of the time

If we get a lower low on the Vix and a higher low on the Vix DPO but a lower high on the spoos, this implies the Vix is exhausted and the trend down on the spoos has already begun.

#3

5% of the time

If we get a higher high on the spoos and a higher low on the Vix with a higher low on the Vix DPO, the Vix itself is divergent and the spoos will likely short.

Long Trades

Here we compare the lows of the spoos to the highs of the Vix and the highs of the DPO.

There are 3 possible forms of divergence when using the Vix.

#1

90% of the time

If we get a lower low on the spoos and a higher high on the Vix but a lower high on the Vix DPO it implies weakness and possible long trade.

#2

5% of the time

If we get a higher high on the Vix and a lower high on the Vix DPO but a higher low on the spoos, this implies the vix is exhausted and the trend up on the spoos has already begun.

#3

5% of the time

If we get a lower low on the spoos and a lower high on the Vix with a lower high on the Vix DPO, the Vix itself is divergent and the spoos will likely rally.

SPOOS & ADSPD & DPO

Short Trades

Here we compare the highs of the spoos to the highs of the ADSPD and the highs of the DPO.

There are 2 possible forms of divergence when using the ADSPD.

#1

60% of the time

If we get a higher high on the spoos and a higher high on the ADSPD but a lower high on the ADSPD DPO it implies weakness and possible short trade.

#2

40% of the time

If we get a lower high on the ADSPD and a lower high on the ADSPD DPO but a higher high on the spoos, this implies the ADSPD itself is divergent and the trend down on the spoos will likely begin.

Long Trades

Here we compare the lows of the spoos to the lows of the ADSPD and the lows of the DPO.

There are 2 possible forms of divergence when using the ADSPD.

#1

60% of the time

If we get a lower low on the spoos and a lower low on the ADSPD but a higher low on the ADSPD DPO it implies weakness and possible long trade.

#2

40% of the time

If we get a higher low on the ADSPD and a higher low on the ADSPD DPO but a lower low on the spoos, this implies the ADSPD itself is divergent and the trend up on the spoos will likely begin.

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Answers

1 Answer(s) found. Leave an Answer.

Answer from Blaiserboy on Feb 7, 2009
Blaiserboy

Thanks for the lesson on Divergence..... it is always interesting to see what another person uses and how they apply their tools...

I am wondering why you do not use CCI..... is there a specific reason or is it just a simple preference....

dave

        

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