Weekly Update

One of the objectives of this blog is to develop a unique swing trading system. One of the primary rules to date is to “trade only in the direction of the trend”; which I define as the technical signals in effect on the immediately higher time frame(s). Therefore, even though the daily chart of the cash S&P500 went on a “buy” signal at the close on January 23, here is what I wrote on the 24th:

“Technically the daily chart flashed a “buy” signal at the close when the composite index turned up failing to confirm the RSI’s new low. In my developing trading system I can’t go long here since the immediately higher time frame (weekly) is still on a “sell” signal as described in my posting of January 6.”

As of today, even with an uptrending price bar on the new chart, the weekly chart remains on a “sell”. I have been expecting prices to “retest” the January 23 lows. As the bounce from that point continues a fair question to ask is “How high will we go before the retest occurs?” My favorite way to answer is to spot resistance areas where moving averages merge with Fibonacci retracement ratios.

Today’s chart shows the weekly with two moving averages heading to meet the 50% retracement line at about 1424.