The Core Philosophy: A Top-Down Approach
The foundation of my strategy is a "top-down" analysis. Instead of getting lost in short-term price movements, you start with the big picture and progressively zoom in. This ensures your intraday actions are aligned with the larger, more powerful market trend.
Step 1: The Weekly Chart Sets the Stage Before even looking at a central weekly level, you determine the market's overall sentiment from the weekly candlestick chart. This is your strategic bias for the entire week.
SPX Example: For the week ending April 25th I posted the chart presented below, the $S&P 500(.SPX)$ didn't just have a random up-week. It formed a bullish reversal setup. This was suggested by:
Price Action: A strong bounce off a low point recovering the central weekly level.
Candlestick: A solid bullish candle suggesting buying pressure and momentum for the week ahead.
Context: The bounce occurred from oversold conditions (as indicated by the bullish crossover in the Stochastic oscillator), adding weight to the reversal signal.
This weekly setup is the reason to even consider a bullish trade. Without it, any buying signal on a shorter timeframe is less reliable for long positions.
Step 2: The Weekly Central Level as Your "Line in the Sand" This line becomes your primary reference for the entire week and the S/R levels published on Fridays calculate how far the price closed from the level of the week ahead, closing above suggests an easier pathway for bulls, it is represented in the red or black numbers in the blue or central column or in the combined levels the figure with black background above the levels underlined and in bold.
Bullish Condition: If the weekly chart analysis is bullish, you want to see the price stay above the central level. This level acts as a dynamic support zone.
Bearish Condition: If the weekly setup is bearish, you would want to see the price stay below the central level, which would then act as resistance.
In the example, the new central weekly level was $5,384 for SPX, and $535 for $SPDR S&P 500 ETF Trust(SPY)$ . The bullish bias from the weekly chart is validated as long as the SPY holds above this $535 level. The pullback on Monday that bounced before reaching it was a sign of strength and a classic confirmation of the level’s importance.
Observe the consistency with oversold oscillators, you can use the same indicators I utilize for the weekly charts, the only difference is that there could be more fake signals, but it is much better to have more tools than trading blindly.
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