All three market-based ETFs had ‘Fast Moves’ off the Open. The SPY and DIA resulted in Intra-Day Reversals. The QQQ managed to extend to the ML2 Level and after a rather deep pullback returned to that level.
In a ‘Fast Move’ which occurred shortly after the Open, the SPY reached the MS1 Level down at 380.35. The Intra-Day Fast Moves, which occur at times other than ‘off the Open’ can be considerably more difficult to recognize, as they can occur over multiple bars in ‘time-frame based analysis.’ The SPY went from above the Open to below the MS1 level in less than 30 minutes. The further a market moves in a short period of time, the more overbought/oversold the market would have become. The Upside Limit in the SPY is 383.24. The question to answer is ‘Do you fade or trade the Fast Move?’ It appears that ‘Fast Moves’ tend to pull back and possibly reverse more frequently than a slower move to the levels. Fast moves are likely to indicate that if you want to take the ‘directional trade’, you should wait for a reasonable pullback or a definable pattern such as a ‘Double Top’ or ‘Double Bottom’. Understanding that if the market reaches the Upside Limit, the likelihood of a close below the MS1 would be diminished. According to ‘The Logical Trader’ by Mark Fisher, market-based ETFs, such as the SPY, DIA, and QQQ have a tendency to ‘back and fill’. For this reason, when demonstrating The Intra-Day Momentum Method on these instruments, I typically use the method to define patterns such as Double-Bottoms, Double-Tops, and Pullbacks.
The SPY and DIA both reached the MS1 Levels down in the first 30 minutes of trading. The most dangerous moves for the directional trade are ‘Fast Moves’. Fast is defined as reaching any level defined by The Intra-Day Momentum Method in 30 minutes. In other words, a market that moves a specified distance in price over a defined period of time.
The SPY MS1 is 371.16, with an Upside Limit of 375.00 .
The DIA MS1 is 300.38, with an Upside Limit of 303.23.
If a market reaches the Upside Limit, the likelihood of a close below the MS1 diminishes.
The SPY and DIA both reached the ML1 level in the first 15 minutes of trading. The QQQ was a little slower to react, reaching the ML1 around 10:45 AM. Fast Moves often come from ‘False Moves’. Was yesterday’s ‘Fast Move’ down a ‘False Move’? Only time will tell, the strongest markets do not tend to pull back all that much.
The ML1 in the SPY is 378.81. The Downside Limit is 375.13.
The ML1 in the DIA is 306.51. The Downside Limit is 304.21
The ML1 in the QQQ is 323.33.
The question to seek an answer to might be: Does yesterday’s ‘Fast Move’ down, justify today’s fast move in the opposite direction?
The DIA has reached the ML1 Level at 311.46. The Downside Limit is 309.91. Strong markets do not tend to pull back all that much. A move to the Downside Limit would reduce the likelihood of a close above the ML1.