Navigator Algorithm Swing Trading Strategy – 10% SPY and 10% QQQ (call spreads)
Today is the last trading day of an ugly January for the markets. I typically won’t day trade on the final day of the month or calendar quarter. Money managers are likely to be dressing up their portfolios today, and it will take a lot of lipstick after such a brutal month. The cross-currents can trip up otherwise reliable indicators -especially as we head into the close.
The S&P 500 is down 8% on the month. Our $10,000 starting account is up about 30% with our well-timed entry on Friday. We are using leverage and call spreads to achieve the return, and if it can be up 30% – so can it go down when we are wrong. A cash account (no leverage) would be up about 1% on the month, an excellent 9% spread over the index.
My weekly outlook video is at the top of this blog and has all the detailed information you will need to trade this week. Take some time and watch it – it is well worth the 20-minutes to prepare you for the week ahead with lots of details.
Day Traders
Again, the last day of the month is not my favorite for day trading, But if you must, overnight inventory is very balanced, and we will open close to the settlement. There is little indication of how opening prices will move, except that we stalled at the 200-day line at Friday’s close, and there is a lot of resistance around that level. Given the significant move off Friday’s low, some profit-taking could be in the cards before we get anywhere this morning. The shorts may also be motivated to sell rallies, as it has paid off over the past month.
Volume / Market Profile – S&P 500 Continuous Futures (March)
As the overnight low (4395) is above the base of Friday’s spike into the close (4385.75), the spike is being accepted (see Spike Rules), which would be bullish. I would be looking to go long on pullbacks that hold above these two levels. Monitor for continuation and target the VPOC and other target levels above discussed in last night’s video – all converging around the Weekly Expected Move high at 4521.
Any acceptance below the base of the spike can potentially change the tone back to negative.
There is an old saying (isn’t there always?) – as goes January, so goes the year. This hypothesis might indeed be applicable this year. The Decennial pattern for years that end in “2” counsels us to expect a tough first half of the year, with recovery after this summer:
I have found these patterns to be quite accurate over the years.
Watch Apple as a good market proxy. It was strong on Friday. Google reports this week which should be interesting.
A.F. Thornton