As of the close of yesterday, p-indicator results for SPY indicate a high probability for a short-term rally. Specifically, results for profit target and stop-loss of 1% and 2% show a large positive bias with high significance.
The p-indicator results above for SPY indicate a short-term positive bias of 21.28 and 20.71 for the profit target/stop-loss pairs of 1%/1% and 2%/2%, respectively. The probability of a short-term recovery after the recent drop is the long success rate of the p-indicator, P-long, shown on the screenshot. This is the probability that a long position initiated at the open of Wednesday, July 13, 2011, will result in a profit for corresponding profit target and stop-loss values. A more useful measure is the difference between the long and short probabilities, P-delta, which is a measure of the bias or tendency of the market to move towards the long or short direction. In this case, the bias is positive for the target/stop pairs mentioned. The significance S is also moderately high.
It should be pointed out that the p-indicator calculations change on a daily basis. Thus, what is measured in terms of probabilities and tendencies today holds until the close of the next day when the indicator is recalculated. This applies to all technical analysis indicators.
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Disclosure: No relevant positions before the submission of this post.
Disclaimer: The author is not a financial advisor and does not recommend the purchase of any security or advise on the suitability of any trade or investment in any timeframe. ETF, stock, futures, forex and options trading and investing involves substantial financial risks and can result in total loss of capital. If investment or other professional advice is required, a licensed professional should be consulted.
