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The divergence between price and RSI(14) which I pointed out two days ago appears to be resolving. Price has been making weaker and weaker highs. When that happens, somethin’s gotta give, usually in the form of price falling, occasionally in the form of a huge burst upward on high volume. We may be going for the more traditional resolution:

I also said I was on the “cusp” of going fully to cash (wherever the hell I came up with that word), and as price opened up, dropped, retraced to yesterday’s close, then failed again, my long positions went bye-bye as the SPYders came back through 153:

I did not flip to short. I’m currently trying out the Dummyspots Swing Method® which I’ve developed over the past few months.

The DSM (Dummyspots Swing Method) ®

This idea started evolving when I tested the TradingMarkets R2 Method using Ameritrade StrategyDesk back in early March. (BTW, Bill is using the actual R2 Method over at his site right now- check it out and follow along.

I doodled with this and changed that, trying as best I could to avoid the common pitfall of modifying a method ad infinitum to make it backtest perfectly - a pitfall which also guarantees that it’s likely to work about 0% of the time in the future… too many conditions.

Anyway, I ended up with something I think has promise, so I’ve been watching it for a few weeks, and am gonna try it for real now. As I said, it started with testing the TradingMarkets R2 Method, and I’ve settled on using a 4-period RSI for my method.

(Shhh, that’s a big secret. I’m thinking of laying claim to the “secret” “magic” number 4. Did you know 4 is the square root of 16 which is the 0.786 Fibonacci retracement of 20.3562 which in turn is the 0.618 Fib of 32.94, which not so coincidentally will be my middle daughter’s age in the Spring of 2027!)

I do have lots of rules for stops and “stop- and- reverses”, which I felt the original R2 method didn’t address adequately, resulting in too much exposure upon initial entry, and missing moves which would have been caught by a decent re-entry procedure. I also pay attention to important things like support and resistance areas on the chart of daily bars, and to a lesser extent, volume trends during these moves.

So, what are the numbers I’m watching? (Oh, I should mention this is all based solely on the S&P 500 via the SPYders). Here goes:

• In cash for now (even though I wanna be short)

• Long if price reverses above 151.75 (and probably growing an ulcer from it). If this long is triggered, the initial stop will be the lower of the current day’s low (that’ll be tomorrow, 6/21) or the previous day’s low (that’s today, at 150.96)

• Long if price falls all the way to 146.90 or below, at which point I will look to enter at the most advantageous point I can spot between there and the close. Any nice intraday hammer, volume spike, hesitation or reversal will do. The initial stop for this entry would be 145.50, or about a buck fifty below the trigger point, which I consider to be a nice “loosey goosey” swing-trade sorta stop. How’s that for scientific?

• Otherwise, I’ll be staying in cash. No shorty. And you all know how much I’ll miss that, because I just love to get small short.