Despite Tuesday’s distribution day and the week’s overall negative feel, the 10 day moving average didn’t really lose much ground this week and it is still quite far away from the 100 day moving average. With SPY hovering right at the 10 day line, if the index continues to head lower over the next few weeks, the 10 day line will follow it towards the 100 day line. This is what we are looking for for our first entry signal in this system.
Had we bought at the last entry signal, we would be sitting on about a 10% profit from that point, however that paper profit would lose ground if the 10 day line begins falling back towards the 100 day line.
One thing that has stood out to me during the first two weeks of watching this system is the realization that the signals are going to be far less frequent than I expected. This will make the system much more manageable for a part time trader.