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Charts To Start 2011, Part 2

Jan. 03, 2011 3:27 PM ETSPY
Bill L. profile picture
Bill L.'s Blog
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In Part 1 I outlined several predictive indicators that have been raising red flags. While it is not unusual to see a divergence or an extreme here or there  if looking across the broad spectrum of indicators, when they start to cluster, that's when high probability trades emerge. Here are some other charts of interest.

Chart 1: S&P E-mini and Momentum

Momentum is literally the most overbought it has been going back years. I prefer simple momentum indicator with the fisher transformation applied. Signals are generated when momentum gets overbought then crosses back below the overbought signal line. While no signal has been generated yet, the fact that the E-mini is the most overbought according to this measure in years is a red flag, and adds weight to the bearish case, especially since this is occurring in conjunction with so many other reversal signs. (You can read more about fisher transformation here: http://www.tradingsystemlab.com/files/Using%20The%20Fisher%20Transform.pdf)

Read the rest here: tier1trading.blogspot.com/2011/01/charts-to-start-2011-part-2.html

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