The Closing Print live trading and financial blog during market hours.

This is a quote from an acquaintance and someone who has taken several hours of “one on one” training/mentoring sessions over the past year.

“So how did you avoid getting whipsawed down and then up – was there a way to get entry to avoid being caught short and then ripped.”

As a trader, the first thing you should ask yourself every time you look at a chart is, “where is price relative to the 9/20ema” then ask yourself, where is the 9ema relative to the 20ema? If price is above we are bullish, if price is below we are bearish. Further your analysis by checking the slope of the exponential moving averages. We use the acronym SOTEMA, slope of the emas for brevity.

Add a couple oscillators and a picture begins to emerge. It is noteworthy to consider that MACD and stochastic are lagging indicators, as price has already moved by the time these indicators (oscillators) change direction. Finally, we consult the short term charts, 15 and 60 minute.

The chart gave us a “BUY SIGNAL” on Tuesday, with price above the 9/20ema. Finally, stochastic, RSI and MACD are headed back to overbought.


SPY 60 Minute Chart

To further our analysis, we constantly monitor the conditions outlined above. In order to answer my friends question, we must add a barometer of sentiment. Are institutions optimistic or pessimistic?

Watching TICK cumulative is one of the best ways to monitor “real time” institutional sentiment. When the collective buying of managers is at the ask, they are effectively creating demand. As “sellers” sense this shift in demand they pull their sell orders and prices rise. The reverse is true. If sellers are hitting the bid, buyers may sense a shift in supply, which causes them to “step away from the bid” forcing sellers to chase price lower to fill their orders. TICK cumulative tabulates this ongoing supply demand equation as we see in the following 60 minute chart. (bottom panel)


Note when TICK cumulative changed direction. At this point, if you were positioned short, you would have acknowledged the gap above the 9/20ema and the directional change of your oscillators. Stochastic moved from oversold and MACD crossed in a bullish direction. RSI continues to rise as well.

Additionally, price action failed to make a lower low. This is key. If bearish momentum is shifting to bullish (MACD) and price action is above the 9/20ema we get stopped out and flip the trade to long. TICK cumulative continues to rise as bidders are forced to buy at higher prices. They literally buy on the up “TICK.” More upticks create a positive slope in this indicator.

SPY 15 Minute Chart

The 5 and 15 minute charts create more noise. That said, they offer an early glimpse into changes in sentiment on this time frame, as we can see in TICK cumulative in the bottom panel. Note the double bottom. While some traders would say the first crossover was a failed signal we also note we didn’t see a “lower low” either.

This time frame was the first indication that pessimism was shifting to optimism.


TICK cumulative continues to rise. Until that changes, traders are presented a bullish picture.

A nuance that John Bollinger taught also bears repeating. When price action fails to push below the lower band, we should pay attention. If the next low does not touch the lower band volatility is dissipating. We should anticipate a change in direction. Note the last time we stopped touching the lower bands was on December 1st. The following day we made a low but failed to touch the lower bands. This nuance is important, when coupled with all points herein.

Market internals further our ambition. Advance decline and volume play a large part of the bigger picture. Breadth is second only to price. Therefore, when sentiment, price and breadth tell you a bullish picture is emerging, pay attention to the nuances. It pays to have experience on your side, which is precisely the reason we started this trading room.

I hope this helps.

Happy Trading – Vinny

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