Would you like to know at what time of the day the S&P is most likely to change direction?
Would it make your trading day easier and less stressful if you could know ahead of time at what time of day to look for a trend reversal or acceleration? Then, when the trade was over go take a break, relax and wait for the next forecasted time.
Or what if you had a tool that enable you to anticipate when the next HFT stop run or Algo program was about to hit the market so you could beat them at their own game?
And what if you could use this particular tool, with standard technical indicators that virtually every trading platform has, to take consistent profits out of the markets (not in just the S&P either) week in and week out?
And what if I told you that such a trading tool DOES exist? It’s called CIT (change in trend) cycles and I’ve been demonstrating their results on my Twitter stream for over a year now.
These cycle forecasts are not perfect but they are one of the most useful tools I have ever used in over 30 years. Think of them like pivot points in price, except CIT cycles are pivot points in TIME.
Over the past few weeks I started showing results of CIT cycle trades in the S&P on my website (along with 6 other major markets: Euro, T-Bonds, Gold, Crude Oil, Soybeans and Apple Inc.) with JUST standard technical indicators and not my own arsenal of proprietary technical indicators.
It’s still early and I have only been showing results for a few weeks now but since April 1 they have produced time stamped results you can see here at www.magisterinvestmentresearch.com/newsletter.html.
But don’t take my word for it. Watch the results unfold yourself with your own eyes and YOU be the judge because I post the S&P trades on my Twitter stream in as close to real time as I can get them out there.
All you need to take advantage of the indications of these ultra short term cycles is the following:
- Access to a 3 minute chart of the market you intend to trade.
- Smoothed Bollinger Bands set to 100 periods and 2 standard deviation bands.
- 7 and 20 period smoothed moving averages
- A standard smoothed stochastic oscillator set to 21 periods
- A zigzag indicator set to “2” for peak strength and ATR
- Also helpful are Magister Pivot Point Calculations for the S&P which is my proprietary method of calculating intra-day pivot levels. But we’ll deal with them later. For now we’re just going to stick with standard indicators that every day trader has access to.
Once you have those indicators at hand, all you need to know next is how to use them with the CIT cycles and that is what I am going to show you over the course of this and the next few articles (There is also a series of posts on my blog and website called “How to Trade CIT Cycles” that shows all the trades we took, and why, in the S&P for the entire month of April along with detailed charts showing precise entries and exits. We gained over +118 handles in the S&P alone during April using these cycles.).
Let’s take a look at trades that were signaled on Monday, May 12 in the S&P using CIT cycles along with the indicators mentioned above:
INSERT 3 MINUTE CHART OF S&P 500 E-MINI FUTURES
First, let’s start with the first trade of the day shortly after today’s open (CIT forecasts are the vertical white lines shown).
We started off with a buy signal at the close of the first 3 minute bar at 1883.00 because the stochastic oscillator finished in negative territory during Friday’s primary session close and there was a bullish CIT at 7:20 CT during European trading that had sent prices higher into the U.S. session. When we opened higher at the U.S. open, this turned the oscillator positive and, since it also opened above the upper band of the Bollinger Bands we recommend using, that showed good momentum to the upside. So we went long at 1883.00.
When we take a trade above the upper band like this it’s hard sometimes to set a profit target so in this case we used the Magister pivots as a guide. In this case we hit the pivot shown at 1887.75 around 8:51 CT and took our first profit of the day of +4.75 handles.
We had already gone past the first CIT cycle forecast of the day at 8:45 (the vertical line shown on the chart) and momentum remained positive (as evidenced by the green bars), and stayed comfortably above the upper band. But at the close of the 9:48 bar we got a close with negative momentum below the upper band. When this happens we have a high probability of being able to at least trade down to the 20 period average shown (the red line). We went short at 1888.25 with a profit target at that average. Prices just missed hitting that target which was at 1886.75 and then started to stabilize and turn higher again. We then exited our short and reversed to a long position at 1888.50 in anticipation that the 8:45 CIT had already produced all the downside it was going to and now the prevailing trend was going to reassert itself.
We held on to this long position with a profit target at the upper band, but prices could not muster a strong enough rally to reach that level and showed a bearish pivot divergence when prices made a new high but the stochastic oscillator shown did not relative to the previous zigzag high. So we exited our long position at 1889.75 for a +1.25 handle profit and reversed to a short position at that same price with a profit target at the 20 period average.
It took approximately 21 minutes for prices to trade down to our target at 1888.75 and give us a +1.00 handle profit, putting us up +6.75 handles for the day.
When the next CIT hit at 12:20 it was a bit of a confusing picture. Momentum was higher going into the CIT and normally we take that as a sign of an impending reversal. But in hindsight, prices bottomed at 1888.00 about 20 minutes earlier. The forecast was close but not close enough to keep from throwing us off slightly. But no harm done as we stayed neutral.
Prices traded slowly higher from there and showed another bearish divergence when a new high was made at 1891.50. When momentum confirmed this by turning lower at the close of the 13:18 bar we sold short at 1890.75. Divergences like this after CIT cycles are usually pretty reliable reversal indicators. What this one was lacking was a close below the 20 period average when it confirmed.
Here again, notice how prices traded down almost to the 20 period average but could not quite get there. When momentum turned positive again at the close of the 13:45 bar, after holding those averages, that was our indication that prices were about to turn higher again and trade up into the next CIT at 14:10. So we exited our short position at 1890.75 for a scratch and reversed back long at that same price.
Again, prices traded to another new high but were still not strong enough to hit our profit target at the upper band and soon stalled at the 14:10 CIT and showed another potentially bearish pivot divergence. We took this as an opportunity to exit our long position at 1891.25 for a +0.50 handle gain and reverse back to a short sale at that same price. We thought that this time indications were strong enough for prices to trade down to the 100 period average and make an attempt to fill the morning gap. But once again the 20 period average held and we had to cover our short at the close of the 14:33 bar at 1892.25 for a loss of -1.00 handle and try the long side again at that same price.
But, once again, even though the market was
making new all time highs, momentum was just pitiful and so we exited our last trade just before the close at 1892.00 for a -0.25 handle loss.
All in all though, not a bad day with a net gain of +6.00 handles for the day in a difficult, slowly trending day.