Day Trading Indicator (revisited)
Last week I shared with you an indicator that I am using for day trading and it worked like a charm today. Here's the link for those of you who may have missed it.
Basically what I've noticed is that TLT leads the S&P by about an hour and that is exactly what happened today. TLT made its low at 9:30 and rallied.... exactly an hour later the S&P made its bottom and rallied... At 1:10 TLT made its high and sold off, exactly an hour later the S&P made its high and sold off!
Today was actually a very good day for me day trading based on just this one indicator. Let's hope this bond/stock relationship continues to hold up because it's like having a road map for what stocks are going to do within the next few hours.
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9 comments:
Nice find man, hopefully it continues to bank for a while :P
Look like the correlation broke down today. The spy made the same top and bottom as the tlt with about a couple of minutes apart. Thanks for the pointer. I'll continue to monitor this and see if there are other factors in play , ie. closer to opex etc..
I made money trading the spy vs TLT today. At around 10:30 TLT made a low for the day and began moving higher... The S&P made its low after 11:00 which is when I went long. TLT bottomed before the S&P did.
Kevin,
I am learning everyday. Your system seem to be pretty good. DO you always take your trade at either intraday trend changes or wait for confirmation from the 10 to 15 minutes charts, ie. after 10:30 low instead of the 9:38 low? Also did you get stopped out on the drop at around 1:10 before the roller coaster
ride up and down?
Hi Mike,
It doesn't have to be exactly an hour apart..What I am really looking for is TLT to lead the S&P...If I see the S&P make a new low but TLT is not making a new low, that would be a buy singal for the S&P. It doesn't have to be an hour apart but it just so happens that most of these divergences have been exactly 60 minutes..
One word of caution...this pattern has been working well for the past 7 days, at some point it will stop working so be aware of that.
To answer your question about how I handled this afternoon, no I didn't get stopped out of my long. The S&P rallied to unchanged but TLT was no where near unchanged which means this market will sell off...I exited my long SPY position near the unchanged level which turned out to be a great exit. I guess I got lucky on the exit..:-)
Do you ever take short position via this indicator or is it not too reliable for that purpose? I asked that because around 2:00 or so, tlt started heading down and within minutes, spy followed. That would have been too soon to jump in but at 2:15 or so, the chart confirmed a downtrend as the tlt started breaking down hard. Do you have any thoughts on this?
Of course I take short positions based on this indicator...but let me stress to you one more time that at some point this relationship will fall apart so don't think I've found some kind of holy grail..
As of now TLT has been a good leading indicator for stocks so for now I will watch it. Next month it could be the yen that leads our market or maybe oil or the asian markets...Just keep that in mind.
Just a question there...how did you find this indicator? You mentioned that next week/month might be another one so what is your algorithm, do you run some sort of automated overlaps and see which one works?
No not at all...I just watch the main markets that influence stocks...Usually there is one market that traders seem to be focused on... This month it's interest rates, a few months ago it was the yen, last year it was oil..It's always changing.
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