$SPY - Huge V-Shaped Rally, New All Time Highs - Now What?

This chart shows SPY , the major ETF proxy for the S&P500 index, on a Daily timeframe .

Plotted on the chart are our SCMR Trends™, which sequences price to find the correct behavior, and SCMR Dynamic Levels™, which dynamically plot support / resistance zones. Both are available in the TradingView App store.

Following a confirmed reversal on Oct 20th (see "O" under price there), the market has continued the trend of the past 15 months by rallying in a straight line to new highs. Although the reversal was easy to spot, the relentless run now creates a (familiar) problem: Do you chase up here?

My take is that the market is more likely to go rangebound after such a strong advice but I do not yet see evidence of a new material decline on the horizon. How to plan for the next steps?

For short term traders, 2 days - 1 week horizon:

1.) Two former Dynamic Supply™ areas and one recent demand area are plotting under price in a range of $196 - 199, so I strongly expect some demand there on a dip. This is a good entry because of what I consider the adverse scenario. Choppy market. This should be near a range low, at least on the first try of the level.

2.) According to SCMR Trends™, price is currently painted green, so if it wasn't obvious already, the price is in a strong uptrend. Strong uptrends rarely roll over and die, usually you get at least one chance to buy a dip.


1.) A new material bad news event can change risk appetite, so the dip or range may be smaller than expected.
4.) Not a recommendation to buy or sell, just an example of how to use the indicators to tackle a common problem in today's market where everything is a V-shaped rally to new highs.

Other Notes:

1.) Both Sector (Industrials) and Sub-sector have been very bullish , so the market of stocks as they say is generally healthy up here
2.) Large Caps as an asset style and Nasdaq have been outperforming.
3.) The most bearish scenario I can think of is this new high is a trap, then we reverse into a range. Given that Nasdaq is way above the highs, it lends to support to a dip buy rather than a breakdown (as in, SPY in the range will coincide with QQQ ranging above old highs which is still bullish )

UPDATE 2/3/15: Hit range support cited above and bounced perfectly. Currently in an *UN*confirmed reversal, but still subordinate to downtrend. On one hand bullish that this wick undercut the prior range low and reversed. On the other, trend is still down and having to test the 198 area so many times is not great. Lets see if the reversal confirms.

How would you describe the limitations of your system: 1. Does it work on all stocks besides SPY? 2. Will it work for commodities or just stocks and FX? 3. Do you find it effective on any intraday aggregation period and how low of a time-based bar?
SPYderCrusher Alphaoptions
Hello Alpha:

Thank you for the interest and the question. First, I want to make clear this is not a standalone system -- you are the system. This is a powerful tool to improve your insight, trade selection, and execution.

The reason I say it's not a system is because while you absolutely you can design several different profitable systems around this product, it does not explicitly say risk this much, use this portfolio management, select these trading vehicles etc. Those are critical parts of a system, not just entry and exit. For example you could design a system around trading only the confirmed reversal bars. Or a system that trades the first pullback in any green or red trend (we have tools to do this in the suite).

My value proposition to the client, aside from the benefits of unique software that doesn't smooth data and properly contextualizes the action unlike the others, is that it can be one size fits all -- so it can find reversals, just like it can find trends, just like it can find support, just like it can find pivot zones.

To answer your other questions, yes it will work on any instrument b/c prices are fractal across timeframes. Some stocks may have different results - the more erratic the trading the harder it will be to find good trends, but the pivots and reversals will still be effective.

The only real limitation software wise is that it will not work on highly illiquid instruments. A thin penny stock on a 2min timeframe will show bad data only because of "garbage in, garbage out". This is due to the fact that the highs and lows of the sequencing algorithm are counting potential bars with no trading. See example below.

---- TNA, a liquid stock on the 1min timeframe is ok.

----BTCUSD, an illiquid currency, is not usable on a 1min timeframe.

TNA 1 minute

BTCUSD 1 minute

1 - 3 minutes is as low as I would go for SPY / IWM / QQQ etc, and for highly liquid stocks like AAPL. In practice, 5 min and up is good. For illiquid items best on a 15min and up.
SPYderCrusher SPYderCrusher
Also @Alphaoptions , if you have any other questions, please feel free to PM me or email me.
when I try to import the indicators with "make it mine" why does it say: error msg study not authorized!
Do these indicators require a subscription?
+2 Reply
yes, they are a subscription product. I am happy to help answer any questions you have just PM me or email me. Thank you for the interest.
I have a question on the support level indicator. Do the lines start appearing on the first green dot? I have market the bars iam talking about with oranges lines in this picture: http://i.imgur.com/6ESUmR7.png. Hope to hear from you soon.
SPYderCrusher 404notfound
Hello 404, that is a great question.

In some cases yes, in others no. Let me explain what they are doing:

The Trends program is effectively sequencing the order of highs and lows into a reverse-engineered fingerprint of price behavior. The way we did this was by testing thousands of charts on thousands of timeframes and putting the specific sequence of highs and lows in the correct order (after testing for efficacy) to find the trends, pivots, reversals, etc.

That is why our indicator is different from (and better than :D ) pretty much every other price indicator-- it does NOT use smoothing -- which destroys the contextual significance of an individual bar. That, and it reduces lag. 99% of indicators use smoothing of price in some way to determine the signal. This treats every bar in the time series as equal which we don't think is the best approach. The various signals on Trend will all plot in realtime as they develop and are valid upon bar close.

So now that we know what Trends does, how about the Dynamic Levels?

The Dynamic Levels are measuring significant trend levels on a *higher timeframe*. What this means in effect is that *if* the higher timeframe (say weekly values, but on a daily chart) is showing some bearish trend, then you will get a red dot above the current week high. Just like traditional support and resistance, you are using hindsight data projected into the future determine where supply or demand will be. The difference here is that it will calculate in realtime as well, just that like realtime data, if new information comes along in the time period we are measuring the output will change.

What makes our Dynamic Levels an improvement are:

1.) The plots are automatic and at the correct values based on true supply demand zones -- not just any localized cluster of values
2.) You can change the lookback period to see how different higher timeframes add up, all on your preferred chart timeframe.
3.) All "finished" bars are there forever. WE REC'D USING THESE AS THE BEST LEVELS
4.) If you do see a random dot (again, assuming a it's Tuesday, on a daily chart, and weekly level) it may move as the week goes on and new information is added to the week on Weds, Thurs, Fri -- this at least, on Tuesday, provides the context that the weekly pattern is negative is there is a dot. At this point, can either just wait for more dots to show to lend credence to the dots, or wait for the whole level to complete and trade a retrace later.

I know this was a lengthy reply but I wanted to be thorough. Please let me know if you have any other questions, feel free to PM me or email me (in my profile). Also, I am happy to arrange a demo as well. I want every user (and potential user) to get the most out of the software as possible, so feel free to reach out.

- Daniel
404notfound SPYderCrusher
First of all => Sry for my late reply :S

Btw are you german ? (Dann könnten wir per PM auch mal so schreiben arbeite selbst als Entwickler bei einer Tradingfirma :) )

If you could hook me up with a demo that would be fantastic ... But more than the Pivot Indicator iam interrested in the SCMR Trend Indicator

I would use it for exits in a strategy ive been working on for some time now:

As you can see i got the entrys working quite well but would need as i said something for my exits

Iam looking forward to your reply
+1 Reply
+1 Reply
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