A Way to Play

If you're nimble, and you can watch the trade, I have a way you might be able to participate in the market right now. This is for all the new members who haven't been with us and gotten in on the bigger picture, which you will shortly. Basically I've said that if you are long since yesterday when the market moved above $105 on the SPY (first it broke below and when it went over $105 in the early a.m. that was our signal to buy longs or Ultra ETFs) I don't think it's a great idea to be adding right now, you pretty much should have a position in place and be ready to start selling into the rally.

I also posted a chart last night that showed a negative 1-min divergence which is interpreted as early weakness in the market-despite the gap. The day before we had a positive divergence meaning early strength and we had a huge gap down, so it didn't make a lot of sense, but we saw the market rebound very quickly off the open"early strength"

So does that mean that today's gap is going to pullback, be filled, maybe even pullback even lower? I'm not sure because there was a lot of different activity toward the close, short covering, non-institutional money buying, institutional money distributing (selling to regular Joes like you and I). Being that smart money needs higher prices and a spectacular move to suck money off the sidelines, I think maybe they will support the gap, but if they don't you may want to buy early weakness.

Here's a setup, but you have to be watching and nimble. If this market goes on a tear to the upside as I believe they would like, then we'll see nice strength so use a 1-min chart of the SPY, add a 22 (blue) and 50 (yellow) simple moving average to price. Also add a 22 period Wilder's RSI. You can stay long or buy long as long as the 22 is above the 50 ma and your stop should be a break below the 50 ma, or a cross down of the 22 below the 50 ma. You'll also want RSI to be above the midpoint (50) to confirm you are not getting whipsawed as moving average systems commonly due.

Many times the market opens at the low and closes at the high, so there's no pullback, that's why I'd say buy 50% of an Ultralong ETF or 3x leveraged ETF. I gave a few examples in last night's post and there are more on the spreadsheets.

So you have a position if this doesn't pullback, if it does, you add the other 50% of your intended position size. Be sure that you have a risk management plan with a current stop at $107.25 on the SPY (This is your market signal despite the vehicle you use to trade) and that a stop out does not risk more than 2% of your portfolio. This is all on Trade Guild under "Resources and Concepts"-"Position Sizing" and "The 2% Rule".

As long as the short average is above the long and RSI is above 50, you should be able to ride the intraday trend, especially if it is strong. Follow the system though. Now get to it, there's not much time.

Using the signal above and trading FAS, you would have made 7% from 2-4 pm