Charts To Start 2011, Part 2
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
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.