September 4, 2022

The Nasdaq put in a reversal day Thursday (close > open in a down trend) which may have led some to expect follow-through higher Friday. But an early rally was snuffed out 75 minutes into the session and a beleaguered market went down from there.

Subsurface, the oils come the closest to offering a semblance of potential opportunity down the road. Otherwise, there are no groups that stand out as beginning to offer even the most primitive of pattern setups. The market's current, three-week pullback has taken care of that.

Inverse ETFs do not offer much solace. The SQQQ chart below shows there is little meat on the bone when it comes to a real pullback entry.

System 7 (beta)

This strategy is proprietary and confidential. It is similar to the bread and butter, which shares common entry pivots in some situations. Unlike the bread and butter it can be used in reversals in addition to pullbacks. Its use of an indicator makes it different. I traded it years ago on a one-minute crude oil chart, but found the timeframe was too small in order to quickly calculate position size and execute efficiently. The one-minute TF is also quite demanding on one's concentration and can contribute to mental fatigue.

Since then, I have not used it. I will post some setups in the Watch List file on a proof-of-concept basis. These are not officially sanctioned by the service and will not appear on the Focus List, as this system is in the beta test stage. Trade them at your own risk.

I am particularly impressed with this setup in the intraday futures market. Using a 1.4:1 reward-to-risk, it has a good win rate and good profit factor on the M3 (three minute) TF when moving the s/l up to breakeven when price is +1R in profit.

This TF also allows one the time needed to calculate position size on the fly and execute comfortably. I avoid using the M5 TF because the M3 provides 67% more bars per hour and 67% more setups per day without having the noise prevalent in some smaller TFs. For someone like myself who does not like to day trade more than two hours per morning, the M3 maximizes my time.

Below are all signal bars using System 7 since July 2021. The "W" is a winning trade of 1:1 r:r and "L" is for a losing trade. Ten wins and one loss. On the second chart I omitted the 20 ema, so it may be difficult to determine whether some of these are longs or shorts. I do not expect this high win rate to continue and neither should you.

Past performance is not necessarily indicative of future results. A back test may operate on certain assumptions that are not present in live trading conditions.

In summation, the market is in a downtrend which removes the possibility of new longs. Outside of the oils, cyclical groups are not showing even a shadow of potential. Of course, all of this could change in an instant, so it pays to avoid complacency.

Kevin Marder

Trading Lessons
Introduction to the service (38:00)
Money management and risk management (20:27)
Bread and butter pullback (11:10)
Bread and butter pullback: Pt II (15:09)
Bread and butter pullback: Pt III (31:48)
Bread and butter pullback: Pt IV (30:16)
Bread and butter pullback: Pt V (1:41)
System R
Short-selling (25:53)
Wyckoff spring reversal (2:30) 
5-minute breakup test (8:01)
Screens (21:03)
The Income Model (New)