This is a little study of my ongoing efforts to develop a reliable close to open trading system and features 4 recent days in the life of the Qs. This version profiles the 10 minute bars although I intend to incorporate these signals into my fractal close-open trading model using 2 , 10 and 30 minute bars in the same way I use RIMM, GOOG and AAPL in the 3 finger lead and reverse systems. The big difference for the Mr. Goodbar system is that I'm using different time frames rather than different stocks to forecast direction.
The chart above displays my standard stable of midpanel technical indicators and the thing that has jumped out at me after scrolling back through a few months of daily data is the following:
When the MACD signals are downslope into the close and
When the SMA 3 and 7 are downslope into the close and
When the SMA 14 is either downslope or level into the close and
When the MACD histogram is at the zero line coming off a positive horizon and
When the parabolics have fired a SELL signal into the close, THEN
SELL the close and cover at he subsequent OPEN.
The Inverse of these signals also apply and I'll be posting examples in the near future.
In the meantime, I'm working on programing these conditional signals into TradeStation to create a close-open forecaster.
The frequency of completely verified trades (ie, meeting all conditions) either positive or negative, appears to be about 1 every 4 days. Initially this system frequency may evoke a ho-hum response, but if you knew that every four days you could place a high probability overnight trade, would you do it? I sure would.
The setup cannot predict the magnitude of the overnight move, but simply the direction so the best tactic IMHO is to take what the market gives you with each of these trades and then wait for the next setup. This initial run will just focus on the Qs. It's highly likely that we'll see disparate results testing the setup with other ETFs and indices since those financial vehicles have different volatility and cycle period characteristics.