The 1000 Tick Chart is a good way to see patterns, since it is not dependent on time. The last few days has seen a series of lower highs and lows formed with 38 - 62% corrections.
Looking at one of these as a trading opportunity (1330 ET on 03/28/08), we see that the MACD of the On-Balance-Volume is showing a downtrend in momentum.
At the same time, the NYSE Advance - Decline Line is making a Pivot High that is lower than the previous Pivot Low. I like to see this as confirmation that momentum is negative in the cash market. The opposite is true for Long trading opportunities (NYSE Advance - Decline Line making a higher Pivot Low than the previous Pivot High).
Also, the Long Term Momentum of the $TICK is negative, and the Short Term Momentum is turning negative at 1322 ET.
In the last post, I briefly described an Indicator called the Pivot Moving 2 Indicator. I have changed the Input labels for clarification purposes and renamed the indicator Pivot EMA Mom Indicator (see code below). I also am using a PaintBar called the Pivot EMA Momentum PaintBar (see code below), which uses the same parameters as the Indicator. So when the Indicator turns negative, the PaintBar turns Red, and when the Indicator turns positive, the PaintBar turns Green. Positive indications is when the 8 period (H+L+C)/3 pivot is larger than the 20 period EMA, and vice versa for a negative indication. I find it to be a good momentum indicator, and helps my trading timing.
At 1330 ET the price momentum turned negatve as indicated by the Indicator and Paintbar. A good place to place a short trade. OBV is negative, NYSE Advance - Decline is negative, $TICK is negative and price momentum is negative. IT DOES NOT GET BETTER THAN THAT!
Charles
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