USING DEMARKER TO TIME SPY 1-MINUTE CHART REVERSALS

***MOST IMPORTANT: I only feel comfortable using this method when market momentum is at its highest, open to 11:00am & 2:20pm to close.

Recently, I've been using the 8-period Demarker Indictator on the 1-minute to chart to aid in timing possible SPY reversals (and essentially SKF entries).

Depicted is Friday's 1-minute SPY chart and the six SPY reversal calls I was able to take advantage of. 

My priorities technically in looking for a possible reversal set-up are as follows.

1. OVERBOUGHT Demarker. Demarker must be printing a reading of at least 75. 80+ preferably.

2. CANDLE PATTERN. I must see a bearish candle reversal pattern.

3. RESISTANCE. I prefer TWO forms of resistance. (a fib line, a moving average, price resistance (typically whole/half numbers), a pivot).

I typically set my "mental stop" on this set-up a few pennies above the high of the SPY reversal candle that I entered against.

What I saw candle/resistance-wise at each point reversal point on Friday:

1. Candle: Off-setting bearish bars.

1. Resistance: Thursday's open, 38 fib retracement line (from Thurs low to high), Price resis at SPY 78

1. Set-up grade: A

2. Candle: Bearish engulfing.

2. Resistance: Price resis at SPY 77

2. Set-up grade: B-

3. Candle: Doji reversal (note price can't close above 76.50)

3. Resistance: Price resis at SPY 76.50

3. Set-up grade: B+ (notice the head and shoulders pattern in the Demarker indicator)

4. Candle: Bearish engulfing

4. Resistance: Price resis at SPY 76.50

4. Set-up grade: B

5. Candle: Big ugly red candle (note price can't close above 78) (note Demarker divergence with 307 high)

5.  Resistance: Thursday's open, 38 fib retracement line (from Thurs low to high), Price resis at SPY 78

5. Set-up grade: B

6. Candle: Ugly tweezer-top

6. Resistance: 62 fib retracement line (from Thurs low to high), Price resis at 79.50

6. Set-up grade: A-

11/18/08 - LONG TRADE - SKF: PROSHARES ULTRASHORT FINANCIALS

At 311, the SPY neared THREE forms of resistance on the intraday 1min chart. 1) Moderate price resistance in the 84.85ish area. 2) Resistance from Opening Range low. 3) Resistance from the 200MA . Additionally the Demarker was indicating an extreme overbought condition . My SKF entry was on the 311 bar as SPY rejected the resistance. My stop was set just above the OR low. My exit target for the trade was the support of the 25 fibonacci extension (combined with the 20ema) from yesterday's high to today's opening range low. The target was hit five bars later.

Wale - W.A.L.E.D.A.N.C.E.

PARTY TIME! TIME TO DANCE!!!!!!!!!!!

11-13-08 - LOL RALLY!!!! - LONG TRADE - COF: CAPITAL ONE FINANCIAL CORP

My afternoon strategy today was relatively simple. I monitored key price (whole numbers, half numbers)/moving avg areas on the SPY. Each time the SPY pulled back, I watched my Trade-Ideas scanner for a big cap name printing strong price action relative to the SPY.

As the SPY would break out of a resistance area, I would load into one of these relative strength plays.

At 229, COF began printing (above yesterday's high) a series of narrow range consolidation bars on the 1min chart. During the period of 229-234, the SPY pulled back approx 90 cents in a much steeper fashion relative to COF flat consolidation. I went long on 236 COF breakout bar/concurrent with the uptick in vol/strong SPY bar (price printing above Wednesday's open). I closed the trade out into strength on the 247 bar as the SPY neared 88.50 price resitance.

11/11/08 - LONG TRADE - GS: GOLDMAN SACHS GROUP INC

At 350, GS made its third test of the 50 fib retracement from Yesterday's High to the Opening Range Pivot Low. Typically a stock will break resistance on the third test. GS then consolidated under the fib line for two bars holding the 5ema. I went long on the 353 bar (concurrent with a siginificant uptick in volume). My target was the top of the fib retracement zone (62% retracement line). The target was hit 4 bars later.

My Morning Jacket & Erykah Badu - Tyrone (Live in Dallas)

11/11/08 - LONG TRADE - SKF: PROSHARES ULTRASHORT FINANCIALS

At 235, the SPY rejected the 62 fibonacci retracement of its recent (approx one month) trading range. Additional to this fib resistance was significant price resistance at SPY 92. Thirdly, The Demarker (lowest pane) indicated an overbought condition.  The 236 bar completed a bearish 3 bar pattern on the 1 minute chart. I went long the SKF on the 237 bar. My exit target was SPY 91 (SPY price resistance/just above Monday's low). This targest was achieved four bars later.

The last month or so, I have been trading the SPY and SKF in tandem this way.

What I look for in this set-up:

1. The SPY must be hitting at least TWO significant forms of resistance (a fib line, a moving average, price resistance, yesterday's high/low, opening range high/low, etc)

2. On the 1min chart, the SPY must print a bearish candle configuration adjacent to the resistance (bearish engulfing, doji reversal, offsetting inverted hammers, piercing pattern, etc)

3. The Demarker must indicate an overbought condition on the SPY 1min chart.

My SKF exit target is typically the nearest form of price resistance (typically a fib line or yesterday's high/low, etc)

Because of the manic price action, I don't usually use stops when trading the SKF (an added risk in trading this ETF)

But if the bid on the SPY starts to print above the resistance level that I entered against, I get the hell out of the trade.