Mid Week Update

I was really expecting a little pump today, but the technicals tell the tale. With today's slide the idea of kissing the channel goodbye with an upside bounce is pretty much out the window. Volume is increasing in conjunction with selling momentum.
All 4 of the ETF basket have kissed the LR11 good-bye to the downside.
Side note: GE down 8.5% today on volume equal to the Qs and XLF. OUCH!!!!
Not one of the mid-panel technicals is bullish, so what started out the week as a neutral forecast has now become resoundingly bearish and the trading range market that was expected has developed into a solid downtrend. For swing traders, the danger here is assessing the odds for a near term rally against further declines.
Perhaps surprisingly, in the face of the virulent selling today the VIX only jumped 8% to 66.46 with an intraday high of 67.19. I think we're going to see VIX 80 again before the bottom . . . the big question is when.
If we don't get any upside relief tomorrow, the odds of it happening on Friday or Monday are slim . . . recall my studies on selling Friday and Monday for a quantitative view.
Not a time to get frisky with your account.
Yes . . . there is some good news . . . guns sales are up . . . way up!
And . . . consigliere Paulson said late in the day that done of the bailout money would be used to buy bad mortgages. Wasn't that Bush's argument for the bailout in the first place? Hey, I'm old, I probably just misunderstood.

The Elephant and the Irish Setter

One e-mail I received recently asked me to clarify the reasoning behind the NYAD / GE divergence studies I have posted for the past several weeks.
The best example I can offer is by comparing an elephant to an Irish Setter. The NYAD, like the elephant, cuts a wide swath with considerable momentum and it's trail is easy to follow. While elephants do go rogue occasionally, that is not typical behavior. At the same time I'm reminded of a friend's Irish Setter, a delightful dog, that was a complete airhead, seemed to have the ability to run in several directions at once and seldom responded to voice commands in any meaningful way. Off leash, the dog would disappear for hours at a time, only returning for chow time or inclement weather. Think of the NYAD as home for our divergent Irish Setter stocks.
To date, I have only mentioned GE in conjunction with the NYAD. However, if you set up the 2 minute chart template as I have shown on multiple posts and then examine NYSE stocks like HD, MCD, WMT and VZ you'll quickly see very similar trading possibilities.
And if you really like excitement, load a few NAZ stocks like PCAR and EXPD against the NYAD.
Within an hour of fiddling with the template you'll have a stable of NYAD divergent trading candidates that will keep even the most hyper daytrader busy for a looooong time.
Some readers have commented that my trading style seems boring because I only focus on one or two ETFs at a time and just trade them up and down.
My response is . . . that's what works for me. I get up 15 minutes pre market open and often shut down well before the final bell. If I didn't spend a few hours a day blogging and testing ideas I'd have a lot more time to play golf and still have the same amount of money in my pocket.
I don't spend any time running scans, sorts or RS studies. I seldom read my live news feeds and consider most fundamental analyses generally flawed and after the fact.
And my expectations are pretty dull too. I just try to generate a steady income stream from day to day. I'm content to make .40 - .60 on a couple thousand shares a day with minimal exposure. I seldom have a tremendous day, but I never have a horrendous day. That's just my style of risk management and liking to sleep at night. I've tried lots of different trading styles in the last 23 years, and this suits me just fine. Each trader needs to find their own risk comfort level and their own trading style, whether it be discretionary, systematic, algorithmic, technical, fundamental or (most likely) some hybrid.
Hope these posts provide some ideas to help you find yours.

GE Monday

A refreshingly obvious and easy GE / NYAD divergence trade this morning.
Trade setup as per previous posts:
Do not enter setup for first 30 minutes.
Trace GE and NYAD slope when they start to diverge - in this case 10:00
After 20 - 30 minutes extend the NYAD slope line - blue line
Wait for reversal in either GE or the NYAD - in this case GE reverses down at 10:30
Parabolics fire a SELL (inital trade signal) and 6 minutes later the 816 crosses down (confirmation). We are now double short (2 positions).
GE crumbles down to the NYAD slope mirror - pink line at 10:56 and continues to ride it down in sync with the NYAD's continuing downslope behavior.
EXIT - at 11:0 the parabolics fire a COVER signal as GE comes off 2 little dojis.
Although the 816 has not crossed in GE, the NYAD 1 minute bars display an 816 cross in conjunction with a parabolics reversal to the upside.
As I've mentioned in previous posts, I often toggle to the 1 minute bars for an exit signal in an attempt to capture as much gain as possible. This tends to lead to whipsaws, but that's the risk management tradeoff that works for me. Another option is to close half the position and let the remainder ride. That would have worked nicely in this scenario as GE is down another .21 since I closed my position and the NYAD is once again downslope, but I'm off for the rest of the day and wanted to be flat.
Net gain: $ .43 for 56 minutes exposure.
This was a long duration trade relative to previous GE examples but, Hey!, every once in while you get a runner like this that just keeps going.

Weekly Pivots Update

Here's the weekly pivots update for the 4 ETFs. The range expansion that I was expecting didn't quite pan out, although the XLE did produce a very modest expansion. Looking forward to next week, all the ranges have contracted substantially except the XLF, which remains essentially flat.

Above is the Qs weekly pivot data running back to 7/3/08 which looks at the MAs of the PP pivots and the MAs of the pivot ranges (charting series 1-5).

Below is the charted progress of the Qs for the past 3 weeks:

Each of the 3 charts becomes progressively longer as we add the present week's data to the string. The gradual decline in the Qs momentum that began the week of 8/29 (week 6) is clearly seen here, as is the range expansion that accompanied it (think volatility).

Last week's chart was interesting in that we began to see a flatting of the Qs pivot and range declines. This is assumed to be the first step in any market reversal to the upside and as such, this week's chart was eagerly anticipated.

And here we go!. The coming week's PP of 31.87 is a modest gain over last week's 31.62, but the Range MA3 has dropped a full point and the Range MA4 has dropped .5 points. Both these trend lines are now looking neutral to bullish and whether week 14 will turn out to be the bear market bottom remains to be seen.

Weekly Update

Another week and we are technically right back where we were 5 days ago . . . riding the upper LR 30 channel line. The difference, of course, is that all 4 ETFs made attempts to kiss the channel good-bye . . . and failed. While there are instances where a return to the upper channel line has served as a springboard to new highs, the current underlying technicals are neutral to bearish, with the exception of the RSI2, which is fast approaching oversold levels in all 4 ETFs.
Volume in all 4 was below both the 10 and 20 DSMAs all week, which suggests that the big money remains on the sidelines despite the election.

As suggested last week, the MA50 served as overhead resistance for the A50's rise and Friday's surge has provided a little pause as the A50 looks poised to retreat back to the 20DMSA. I've added the AROON indicator to the chart for more guidance, which in this case is in a SELL mode.

The A200 looks very similar to the A50, the difference being that price has already retraced to the 20DSMA. The A200 AROON is also on a SELL.

MACD on both the A50 and A200 are dead on the zero line and trending down short term.

Not a lot to go on for next week which, given the current technicals, is more likely to be a trading range market than a trending one.

More GE Trades

Today's GE scalps shown above.
11:00 divergence of GE and the NYAD on 2 minute bars (white down arrow), which (interestingly) corresponds to an 816 cross.
The divergence lasts 10 minutes (which as mentioned in previous posts, is a typical duration.)
Parabolics fire a SELL on GE at 11:16 while the NYAD continues down.
For my own trading I frequently take the trade after the second 2 minute parabolic signal (white dot) and then double up after 4 dots, as this confirms the trend.
This turned out to be a really nice fade that lasted 18 minutes that produced a .42 gain before the NYAD reversed at 11:38 (big pink blob) and kicked me out of the trade.
The next setup kicks off at 12:50 when GE and the NYAD once again diverge until 13:08 (or 18 minutes, which is on the long side of the expected divergence duration).
At 13:08 the parabolics fire a SELL and GE drops .08 in 2 minutes.
I enter short at 13:09 (late to the game) and exit after only 10 minutes when the parabolics fire a COVER and GE hits the mirror of the NYAD downslope line and projection (orange/blue line).
Net gain from trade = .07 (Hey!, at least it wasn't a loss).
With the NYAD still downslope and being a glutton for punishment, I short GE again at 13:33 on the parabolic SELL signal.
My target, of course, is . . . (this is a test). . .the mirror of the orange NYAD downslope line.
16 minutes later our target gets hit and with the parabolics firing a COVER signal at 13:49 (on 1 minute bars), I'm out.
Net gain from trade = .10, so a little better than the previous but nothing to write home about.
I'm done for the day as I've a few errands to attend to.
Summary for the day. . . 3 trades. . . total gain .60 and I'm flat going into Monday.
Today's total range for GE (as of 15:00) is 18.28-19.10 = .82 . . . so I'm happy to walk away with .60 for 44 minutes of exposure.

A Different View of the NYAD

Here's a look at the NYAD compared with the Qs for the last three months on daily bars.
First of all, I need to clarify that I wouldn't trade the Qs or anything else based on the NYAD daily chart, even if I was being prodded to do so with a red hot poker.
I've already expressed my daytrading bias and focus in many previous posts, and this same bias extends to the NYAD. The price scale skew that typifies the NYAD at the market open is a giant caution flag for any traders (like myself) trying to use the NYAD to guage momentum divergence . . . which is why I have suggested not implementing any NYAD based trades during the first 30 minutes, during which time NYAD volatility tends to subside to a more trackable range.
With that disclaimer, what I find interesting here is the way the daily NYAD has responded to the 3 LRs study, especially the LR30. Although the LR30 mean has been upslope since mid-September, the majority of daily bars have clearly been below the zero line. Although we can trace a distinctly upslope momentum in the NYAD in the week prior to the election, the last 2 days behavior has retraced the NYAD to a level currently below the lower channel leg.
This current daily NYAD position is accompanied by a number of technical indicators suggesting that a quick bounce off this otherwise oversold level is not likely to occur quickly. This short term bearish stance is also reflected in the Qs technicals, as the Qs have retreated once again to the upper LR30 channel.

GE / NYAD Signal Setups

Here are a couple more ideas for watching GE (and other securities) in conjunction with the NYAD (NYSE advance/decline line).
Orange lines are slope of GE and NYAD for 30 minutes.
Blue lines are 60 minute extensions of the orange, unless a reversal.
Pink lines are mirror of NYAD slope onto GE price range.
White circles indicate reversals in GE upward slope, accompanied by parabolic sell signals (per yesterday's post).
The low risk trade develops when the 30 minute slope of the NYAD and its projection diverge from the 30 minute GE slope at 10:45. Interestingly, the GE slope continues to diverge for 30 minutes, which is somewhat longer than we are use to seeing over the past 2 weeks, and then reverses to the downside at 11:15, accompanied by a parabolic sell signal and a 816 sell signal 6 minutes later. With these 3 indicators now in sync, the scene is set for a clear GE downtrend.

Looking carefully at the chart you might wonder why the GE reversal at 10:15 doesn't merit the same level of confidence as the 11:15 trade.
The reason is simple . . . the NYAD is still in an upslope at 10:15. While a more risk tolerant trader might have taken the 10:15 GE sell trade as signaled by the parabolics and confirmed by the 816 cross 8 minutes later for a net gain of .17 - .20, I prefer to wait for all 3 signals to be in sync. The result is fewer trades, but also fewer whipsaws and less anxiety. That's my comfort level.

Pullbacks and Reversals

This is part of my continuing study of GE and NYAD divergences that may serve as high probability tells for intraday scalps of GE. Although my initial tests of GE and QQQQ divergences still offer trading opportunities, my research over the past 2 weeks has led me to conclude the $NYAD is a much more reliable GE counterpart. This is probably due to the fact that the Qs reflect the average momentum of 100 Nasdaq stocks, while the NYAD reflects momentum of the entire 6400 issues in the NYSE, therefore making the NYAD a lot harder for market makers to game than the Qs.
What was interesting about today's action was the 11:00 slope reversal in th NYAD, while GE continued to climb, then falter, then climb again to noon when it began a 4 hour descent, punctuated by several pullbacks to the downsloping GE trend line.
One indicator that is helpful capturing these short term pullbacks is the parabolic SAR, which I typically set up with a minimum step of .05 and a maximum step of .2. Most platforms provide the parabolics, although the default settings may be a little different. The white arrows on the chart above designate the parabolic triggers for today's GE overhead pullbacks. Used as either a confirming or leading signal, the parabolics can help keep you on the right side of a trade.

Waiting

Summary for the day: nothing happened on low volume. A few little GE/NYAD scalps set up but I had little interest in chasing them. Which, as it turned out, was the best course of action as none lasted more than 12 minutes or returned more than .15. The intraday hovering around the PP was a good indication that today would be range bound.
Based on my weekend post, the technicals looked like we would see a run up before the election, which clearly failed to materialize today. Maybe tomorrow.
I'm more inclined to just stand back and wait for volume to resume.

A side note on GE/NYAD trades (or other divergent trades using the NYAD):
Because of the frequent openings pop in the NYAD, it is not recommended using the NYAD for anything other than intraday trades after the first 30 minutes. Trying to compare the NYAD with other equities and ETFs on daily bars will inevitably produce a conflict of price scales that will effectively prevent you from discerning otherwise attractive slope divergences.
Also, keep in mind that GE arbitrage is a popular trading theme (although I seem to be late to the game), and as such most slope divergences of GE with the NYAD, Qs and other correlated tells are best played on 1 or 2 minute bars since the duration of most recent divergences seldom exceeds 20 minutes and exits have to be fairly precise. . . which is why I term these trades scalps.

Weekly ETF Pivots Update

All 4 of the ETF basket reached the upper LR30 daily channel this week and all 4 closed the week with the technicals in a bullish mode. We are now at a challenging point: will the market exhibit some of that (truly) irrational exuberance and kiss the channel good-bye to the upside . . or will the LR30 continue to hold as upper resistance and usher in the next cycle down to the lower LR30 channel? That, of course, is the 64 dollar question and whether the election results catalyze a market explosion or an implosion remains to be seen.
One scenario that has been posted widely foresees a surge into election eve and perhaps for a day or 2 thereafter, followed by a virulent decline to previous or lower lows. Given the position of the current technicals, this is a distinct possibility, so extreme caution is advised for those favoring swing positions.

For the week all 4 of the ETF basket closed at the R1 level, reflecting the lockstep bullish behavior of the markets. This should also be an indication to you that these ETFs do indeed move in somewhat predictable ways.

The pivot ranges for the coming week are almost mirror images of last week, so what's interesting here is that the % delta of the ranges has almost reached 100, indicating a leveling off of volatility. Unfortunately, this is happening when the asset value of these ETFs is down about 40% from this time last year. What this suggests, of course, is an impending range expansion . . but as with the LR30s study in the top charts, the question is whether the break will be to the upside or downside.Finally, a quick look at the NDX (Qs) stocks above the 50 day MA. Coming off a zero reading for most of October, this certainty looks encouraging, and based on past behavior of this indicator, we should at least expect a cross of the MA50 line before a retracement. We'll check back next week to see how the A50 played out.

GE and the NYAD

Here's a different spin on the GE / Qs trade . . . GE and the NYAD. Those of you who have stuck with me for a while know my strong predictive feelings about the NYAD (on most platforms the symbol is $NYAD. TS makes it a little harder to display, but this is the Schwab StreetSmart Pro chart shown above). The chart above shows that the NYAD smooths out a lot of the volatility (or noise, depending on your viewpoint) that would otherwise appear if we use the Qs for our GE pair.
Using the NYAD enables us to see GE divergences from the NYAD mean (slope) farily quickly. As long as the NYAD maintains a trend line, GE's volatility will typically revert back to the NYAD trendline slope.
In the chart above the lower orange lines trace the NYAD short term trend line slopes, with a mirror projection of those slopes onto the GE price chart.
The blue lines define short term volatility skews of GE relative to the NYAD.
The blue circles define the turning points or reversals of GE volatility skews as they begin retracing back to the mean NYAD slope line.
The white circles capture the 816 crosses which I mentioned previously as intraday trading signals. It's interesting that on today's chart, 2 of the 4 circles correspond precisely with the GE slope divergences from the NYAD, and the other 2 actually lag the signals provided by the reversal of the GE slope line.
As a tickler today, we had a little GE/NYAD divergence that set up at 13:25 but quickly developed into a 10 minute squat bar on GE and that was our signal to exit the long trade with a piddling .12 gain.
My four 816 GE trades today netted .55 as GE displayed a strength relative to the Qs that was absent yesterday.
Using the NYAD for a GE baseline in lieu of the Qs appears to offer a distinct advantage and I'll continue to explore the possibilities of this pair and other NYAD combos in my ongoing research.
When, and if, the VIX retreats from it's current 60s level, these scalps will likely become more difficult to discern and less likely to generate an attractive ROI. Until then, these quick mean reversion trades avoid the risk associated with having to predict market direction.

Qs and the Pivots

A nice article in the new November issue of Technical Analysis of Stocks & Commodities by Jim White. . The Logic of Pivot Trading. Copyrights prevent me from posting the article but check it out at the local Barnes and Noble or Borders for free. What made me laugh out loud when I started to read the article was his test example . . . GE. Does everybody and his brother already know about GE and I'm the last to find out? Hey!, there's always another trading day so let's get on with mining some coin out of this thing.
Jim's arguments for watching the pivots closely are the same ones I've been preaching for years . . . simply put . . . they work. You can email him at jwhite43@roadrunner.com. Tell him I sent you and that you're a struggling trader (or some other pitiful story) and can't afford a TASC subscription . . . maybe he'll email you the article and/or some of his other links.
True to form today the Qs did their little pivot dance with my previously discussed 33.06 as the glass ceiling of resistance. Ain't it amazing how these pivots get hit day in and day out??????
Quite a few little 816 scalps today (blue ellipses). . . the only area of congestion developing the last 30 minutes of the 14:00 hour (orange ellipse).
General rule of thumb for the 816 trades is to stay flat for the first 30 -45 minutes while the opening range sets up. Sometimes that range becomes a trend for the day with little pullback, and on those occasions you have to be prepared to board the train and use an 816 reversal as a stop. Remember, these are daytrades, and are not to be trusted for overnight carries. Net result for the day 7 good 816 trades and 3 sloppy ones. I'll look at some easy ways to separate the potentially sloppy trades from the higher probability setups in some future posts.
No GE/Qs scalps today as no slope divergences developed. The only divergence was that the Qs closed up over a buck while GE closed up .13, revealing a relative weakness in GE. It'll be interesting to see if that relative weakness continues over the next few days or if GE and the Qs return to parity. I'm just taking it a day at a time for now.

More GE / QQQQ trades

I've got to admit a real fondness for these little GE/QQQQ scalps.
Since I mentioned the concept last Thursday I've received a number of e-mails from other traders who regularly trade the GE/Qs (and other) divergences. It turns out that one of the most profitable traders at a well known Las Vegas prop shop only trades GE but, as I mentioned Monday, the prop shops have capital, market making and auto trade capabilities than mere mortals like you and I can't easily replicate. There are ways to get close however, as per my closing scalp yesterday, although I need to study the details of the setup a little closer to verify that the typical trade risk/reward is acceptable. I'm also going to devote some time developing TS code to capture those divergences on 1 and 2 minute bars and/or a TICK basis. My trader buddy Larry, who introduced me to the GE/Qs trade already has such software, but I've seen it and believe it has some risk management flaws that need repair before I would throw money at it. Another project for my "to-do" list.
The Qs hit 33.08, so my Monday projection of 33.06 was off by .02. I'm always a little surprised by how well the LR30 channel manages to capture support and resistance levels, and when I fired up the charts today and saw the Qs intraday R1 pivot at 33.02 I knew the odds of the Qs getting there were about 100%.

Qs EOD uodate

OK, that was interesting. No news but big momo. Betting on the election maybe. New issue of SFO has two articles dealing with likely market reaction to Nov 4th results. Concurrence of both authors: McCain- good for markets, Obama - bad for markets. That, of course is based on their perspective and other market participants may have different views. Bottom line . . . your guess is as good as mine.
With such upward momentum into today's close, we may get a carry through tomorrow and possibly Thursday, but I'm expecting a pull back by Friday's close. And that's a stretch for me as my crystal ball rarely stays in focus for more than 150 minutes.
Next overhead resistance level for the Qs is at 33.06 or thereabouts.
Watch volume tomorrow to see if some that mountain of cash parked on the sidelines starts coming back into the markets.
Nice little GE/Qs divergent scalp 15 minutes pre close that lasted 10 minutes. In GE at 19.08, out at 19.45 for a really quick .37 and I was sweating every second of it. A lot of up volume the last 2 minutes, but I was out by then.
Markets are off a bit after hours so I'll be standing back at the open just to see how much retrace we get . . .that may provide a good indication of how much of today's medium volume surge was short covering.

Qs Update and the Pivots

Stepping back a little bit to review the Qs in daily, weekly and monthly bars with the 3 linear regression(30,11,3) study. Whether the Qs are destined to mimic other major indices that have already retraced back to mid-2002 levels remains to be seen, but the daily technicals continue to suggest that's a strong possibility.
The LR30 mean has served as overhead resistance for the Qs October slide. Until the Qs can muster strength to get above that line longside bets are best kept in check. For the present, even the shorter term 11 and 3 period LRs are downslope . . . yielding 3 arguments for the shorts.

This a little refinement of my ongoing weekly pivot study, in this case focused solely on the Qs.

The interesting thing here is that as the PP trends down (series 1-3) the 3 and 4 week moving averages of the R1-S1 range (series 4 & 5 have continued to rise. As long as these 2 slopes continue to converge, the downtrend is firmly in place.

We are clearly experiencing a new paradigm in the markets that probably has a few more surprises in line for us before a real bottom sets up. Today the DJ is currently up 156 while the VIX is down 4.5% to 76.5. Anybody who'd suggested a VIX of 76 in the midst of a rally 12 months ago would have been hauled off for psychiatric evaluation . . . but here we are today.

I'm sounding like a broken record, I know, but IMHO daytrading continues to be the best risk management approach to current market volatility.

GE / QQQQ Trade - Part 2

This post is a continuation of the GE/QQQQ trade post on Thursday.
Above the ratio GE and QQQQ chart. That nice horizontal line of the 20 and 50 DSMAs is a clue that this correlated pair trade has good potential. A lot of volatility off the mean to be sure, but for daytraders this is a good thing. If you run a ratio study of GE against DIA, IWM or SPY, you'll see why the Qs are the best correlated index to use.
A couple background facts to keep in mind:
GE is almost always in the top 10 volume of listed stocks.
GE typically trades 30-40% of Qs volume, although a recent downgrade by Zacks to "strong sell" has probably inflated the already substantial sell momentum.
GE is a favorite with several large prop shops, both as a pairs trade (not necessarily with the Qs) and as a stand alone daytrade. The prop shops typically hit it hard at the open and the close, when they can scalp the first and last few minutes of the trading day with mean reversion trades. This means lots of liquidity and lots of support for the mean reversion approach. A word of caution, however: the prop shops have very sophisticated program trading algorithms that execute automatically, so the open/close trades are not recommended for the average retail trader, as your odds of becoming cannon fodder for the prop shops is pretty high.
Although I mentioned the idea of a GE/QQQQ pairs trade in Thursday post, for practical purposes I wouldn't (and don't) trade it that way. I just trade the GE side. So how do you trade it? Well, here's one approach.
Above is Friday morning's chart of GE with the Qs shown as the gray overlay.
Since these 2 track together in the larger timeframe, the goal is to capitalize on short term divergences. The orange lines identify 2 divergences in slope during the morning session. It is at the point when the Qs are still trending up and GE reverses from a short term downslope that the high probability trades set up, which are shown as the small orange ellipses.
This is the same chart as above, but pulled back a little bit to show how GE and the Qs performed after the trade entries. You can also notice that when the Qs reversed momentum (slope) at 11:00 and 11:45, these were great exit signals for the GE long positions . . and a general risk management rule for this trade is to use a trend reversal in the Qs as an exit stop.

Weekly Update

Weekly pivot update.
The absolute R1-S1 range value has remained relatively stable for 3 of the 4 ETFs, although XLE actually declined 37%. The percent range for the upcoming week for the 4 ETFs has evened out at the +/- 20 level suggesting range contraction as the most likely next move.
The promising closing alignment of the PPs last week turned out to be just a pause in the selling, not a jumping off point to higher levels, and with a return to this week's slide of closing prices to the low of the weekly range, the trend has once again resumed to the downside.
Yes, we got a nice rally on Monday, but that turned out to be a good opportunity to sell, not buy. As global financial markets continue to unwind, the outlook for the long side is not favorable. All 4 ETF midpanel technicals are trending down and offer little optimism for the near term.
Volume MA continues to trend up for the basket.

For the week: Qs down 8%, IWM down 10% (new low), XLE down 5% and XLF down 11.75%.

The GE & QQQQ Reversion Trade

Here's a completely different approach to trading the Qs. Trade GE instead. I've got a trading buddy that I've known for years, quite successful and well ahead for the year. Like me, he likes to focus on just a few equities, but he plays them a little differently. His favorite play is a GE/QQQQ reversion. While you could play this like a pair trade, you generate better ROI (plus buy more risk) by just playing one side. He prefers the GE side.
Top set of charts shows GE and the Qs in 8 minute bars on Tuesday. Both love the pivots and the 8/16 MA crosses. The mid panel technicals (RSI, %D and StochRSI) are also eerily similar, as are the volume bars patterns, especially into the close. If you set these charts up side by side, this is the type of alignment you'll typically see.

Now, here is the GE chart extending 22 hours in 5 minute bars with the Qs shown as a gray overlay. Note the larger orange ellipses. . .these are areas where a divergence of slope and/or direction of the GE and Qs prices diverged. These are the opportunity areas. The problem is, of course, you never know when these little anomalies are going to develop. A lazy daytrader like myself can just monitor this chart/overlay off in a corner of the screen and wait for the trades to setup. With my platform, I can also set an audio alert to let me know when the prices diverge.
These are high probability trades. . . at least that's what Larry tells me and he's got an Aston Martin in his garage to back up his claim.

As an aside, check out the smaller yellow circles on the lower chart set . . . these are 8/16 MA crossovers that I mentioned yesterday (but now shown in 5 minute bars). Nothing wrong with these trades either, and while Larry got 2 trades in 22 hours, the 816 generated 10.

816 Update - Keep it Simple

Back in August I profiled a really simple trading system that bought (or shorted) crossovers of the 8 and 16 bar moving averages. Impressed with the results, I subsequently adjusted my previous 10/20 MA platform settings to 8/16.
Here's a quick thumbnail performance update of the 816 and my 4 ETF basket.
Per my usual backtesting, I use Elder's 1:6 fractal time ratio of 10 minute, 60 minute and daily bars. Backtest period is 500 bars, which is the upper limit that Schwab's strategy tester will allow.
For short term gains and maximum risk management this little study makes a good case for the 10 minute bars. Rather dismal win/ lose ratios, but the system is completely mechanical, no stops, no discretion, and it makes money. And . . . in every single case the system worked better than a buy and hold approach . . . which is pretty much a no-brainer in today's markets.
Sometimes keeping it REALLY simple ain't such a bad idea.