I use it to spot intermediate term bottoms, or those that produce minimum 100 S&P points rally. In normal times it worked flawlessly but it had never been tested in a crash like move when I designed it. If you consider the October sell off as a crash , then it worked there too because it helped me to spot Oct 10 and 28 bottoms successfully.
Well, as you can see, we have another signal in place, the most strongest I have ever seen. However there is a method to use this indicator in your trading.
When you have a signal like this, there are two possible scenarios for the next day (tomorrow):
1- If we gap down, we may sell off further in a scary way and market reverses massively to close in positive.
2- If we gap up, we rally little further in the morning then sell off severely until we test some important trend line from which we reverse and close in positive.
Both scenario ends with a reversal that is followed by more upside in near future. The minimum S&P point this setup produces from bottom to top is about 100 ES points.
In short, in both scenario, there will be more pain tomorrow followed by a massive reversal that will take us 100 or more S&P points from the low to top, the move lasts minimum 3 days.
Given the current amplitude of the indicator we have to gap up like 20-30 ES points... But we had too many bad news in AH... I still think we may gap up.
I expect the following price structure to form based on the above scenario. Intraday low is hard to pinpoint but we may as well make a new marginal low before reversing.
Ever tasted shark liver?
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