trend days and $tick
Mole is tinkering with his trend day indicator. Here is how I do mine.
Firstly I want the cleanest data I can possibly get. For this a 1 minute or 5 minute chart is too much smoothing. I use a single tick chart. I draw a line at the zero mark, and vertical lines where the start and end of the first 45 minutes of trade are.
45 minutes = 2700 seconds. So I count the seconds under zero, if its > 270, trend day is *off* the table.
I pull out a pencil and paper and start counting. Like this (I have to split the chart into two halves to make it big enough to actually count the seconds)
So here we have 50 seconds below zero.
The second half of the chart looks like this..
So we have a total of 224 seconds (out of a maximum 270). Therefore we DO HAVE A TREND DAY SIGNAL.
Mole, see why I do not like approximations here? Its an exact science that is required, a little smoothing and tinkering and we see false signals.
OK Did this trend day signal work? Its certainly an upday, but this is NOT what I would consider a bona fide trend day. Therefore this is a false signal in some respects.
A cautious trader would use this signal as a sign to take SHORT TRADES OFF THE TABLE. Looking at the 5 min chart trading the short side today would have been a disaster, and the indicator would have been good for that.
In the bigger picture where are we?
Today we opened out strong. Stopped out the shorts (myself included) with a big gap up with NO ATTEMPT TO FILL. Looking like a potential trend day. But then an interesting thing happened. No additional bulls rushed in to keep the momentum going.
What does this tell us about how the market is reacting to this level? With everything possible in the bulls favor (shorts rushing to cover, bullish $tick readings, gap up) there are no sideline bulls waiting to buy.
A few days ago I gave 3 potential scenarios, stating that if we kept going towards 1260 without a pullback that would be an unhealthy sort of rally.
It looks like Mole is exactly right, its sucking towards that volume hole. I would not be long at this level, even though it may have a little more upside. Its just not behaving right.
OTOH, its too early to get short again, the market needs to digest the squeeze of today before the shorts can mount another attack.
No edge right now.