The single best stand alone indicator for timing this market during the past six months has been the SPX 240-minute Trend Model. I can make a similar case for the 120 minute and Daily Trend Models, but the 240 minute does provide a very nice balance between the two and in fact, between intraday and end-of-day trading.
- Period: February 3, 2010 - July 16, 2010
- SPX = 1086 -> 1066
- Net = -20 SPX points
- Trades: 21
- Wins: 12
- Losses: 9
- Percent Winners: 57%
- Net = +261 SPX points
The characteristics of this performance that stand out are that first, it is of recent price action, reflecting the personality and character of this market, although subject to change at any time; second, that even though almost half of the trades are closed out as losses, that the winners not only compensate for the losses but go on to provide stellar results.
Finally, the characteristic that maybe is the most striking of all is that this is a purely objective, mechanical market timing methodology. There is no subjectivity (read: stress) whatsoever in the trading system.
What does it take to trade something like this?
The jury is out. Belief is certainly up there on the list, discipline too. Maybe the elimination of ego is also critical to successful implementation. All three seem to be essential, along with the simple algorithm that draws the trend line, which is updated throughout the trading day in my subscription service.
The model went SHORT on Friday.