06 April 2007

The AntiGeorge Indicator

On the morning of the big meltdown, February 27th, I wrote a post titled "Crosscurrents". In it, I theorized that it..."Should be quite an interesting morning as RSI traders would have been buying the oversold US equities into yesterday's close...a tactic that has worked almost without exception,"...thanks to the Shark Report for the link.

Obviously, I had no way of knowing what would take place that day but I felt the market would have some extra selling pressure as those short term positions might be unwound should the day's trade really take off to the downside.

With that in mind, I want to present a new indicator that I will be tracking on the site. We will call this new tool the AntiGeorge Indicator and it will work in precise inversion to the very popular 2 Day RSI Indicator, summarized below.

2 Day RSI Indicator.

Here are the Rules:

  1. The SPX is above its 200-day simple moving average (you can use any S&P 500 derivative product, including the SPYs, E-minis, etc). (We are going to wave this very important parameter for now, we will revisit when and if the SPX falls through the 200 SMA).
  2. Day 1 - the 2-period RSI is below 65. This tells us that the market is in a neutral to possibly oversold condition.
  3. Day 2 - the 2-period RSI closes lower than Day 1.
  4. Day 3 - the 2-period RSI closes lower than Day 2.
  5. Buy the market (SPX, SPY, E-mini, etc) on the close Day 3.
  6. Exit when the 2-period RSI closes above 75.
The AntiGeorge Indicator
  1. Day 1 - the 2- period RSI is above 65.
  2. Day 2 - the 2-period RSI closes higher than Day 1.
  3. Day 3 - the 2-period RSI closes higher than Day 2.
  4. Short the market (SPX, SPY or the S&P E-mini futures) on the close of Day 3.
  5. Exit when the 2-period RSI closes below 15.
I'll be updating the results starting with trade triggers as of Monday's close (4 March 2007).

Good Trading...jfg.

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