The ETFs reached the Intra-Day Momentum Levels several times this week. The levels are presented in the graphs with explanations of market action.
SPY
The SPY reached the MS1 in a fast move down on Monday and closed below the Open. On Tuesday after a Gap Up on the Open, the SPY traded in a narrow range and did not fill in the gap from Monday’s price action. Wednesday the SPY failed once again to close the Gap from Monday-Tuesday. It later rallied to the ML1 around 2 PM in a ‘Fast Move.’ On Thursday the SPY reached the MS1 (440.16) shortly after 10 AM and pulled back off the low. Later in the afternoon, the SPY reached the MS2 (437.10) and closed below that level. On Friday, the SPY reached the MS1 (433.52) Level down just before noon. I rallied back to the Open and closed below the Open and above the MS1 level.
Fast Moves Intra-Day
One of the more challenging obstacles is identifying the ‘Fast Move’ that occurs over multiple bars in data normalized by time. Such as the ‘Fast Move’ to the MS1 level on Monday afternoon in the SPY.
QQQ
The QQQ traded in a narrow range on Monday and Tuesday. The QQQ gapped up on the Open on Tuesday and did not fill the gap in intra-day trading. On Wednesday, the QQQ reached theMS1 (351.05) down in a Fast Move at the open. Later in the day, after testing the MS1, it made a Fast move to the ML1 (356.79). On Thursday, the QQQ reached the MS1 down (349.45). Pulled back and continued lower to the MS2 (346.24) and closed below that level. On Friday, the QQQ reached the MS1 level down (342.84), continued lower without much of a pullback. After it reached the MS2 (339.27) around 1 PM and rallied back to above the MS1, but closed below that level.
DIA
On Monday, the DIA reached the MS1 (343.88), pulled back off the lows to test the Open and the High of the Day. The DIA later tested the MS1 and closed below the Open and above the MS1 level. Tuesday, after a Gap Up on the Open, it did not fill the gap from Monday-Tuesday. On Wednesday the DIA reached the MS1 level in a test of Monday’s High before a rally to the ML1 level. Thursday, the DIA reached the MS1 (354.42) in a Fast Move, in the first 30 minutes of trading. The DIA reached the MS2 (343.41) level, in late trading and closed below the MS1 level, above the MS2 level. Friday, the DIA gapped down on the open and quickly tested Thursday’s high and close.
Lessons for the Week
Lessons for the week: 1. Fast Moves intra-day are more challenging to identify, than those that occur at the Open. 2. Pay attention to how far a market moves against a directional move or level. You will notice, that the strongest and weakest markets do not tend to have deep pullbacks.
Method to the Madness
In his book, The Logical Trader, Mark Fisher pointed out a few very important aspects of the markets worth noting. Fisher pointed out that a move to one of the ACD levels that occurred rapidly, did not generate a signal. He stated that if a trader had an Opening Range of 5 minutes, then the market must trade at the A Level for at least 1/2 of the time of the opening range. In this case, the market would have to trade at the level for 2.5 minutes. The concept of the ‘Fast Move’ certainly gives an enormous amount of credibility to that idea.
Fisher also indicated that market-based instruments were more challenging to trade because of their tendency to ‘back-and-fill.’ I interpret this to indicate that he feels as though they may not ‘trend’ all that well. This is also the reason I am demonstrating The Intra-Day Momentum Level by applying it to market-based ETFs.