Tradable Top?

Is there a tradeable top in the US indices? In raising this question, I have to distinguish the S&P, Dow and Russell from the NASDAQ which is still showing signs of strength.

The chart below is the S&P daily with Gann Fan Angles (GFAs).

We see:

• Prices holding above the 2 X1 until January 22. This is a bullish state. (By the way, based on the 4-Phase Framework, those trading the 4-Index and Initial Balance Systems would take buy signals only. The strategy produced a strong positive expectancy).
• The close below the 2 X1 signalled a 67% probability of choppy action to come (in the 4-Phase Framework, a Pause Phase).

Considering next the price action from January 30……

I have cyclical highs coming on February 4 – 5 (+/- one day). I was keen to see if directional momentum would continue following the Pause Phase.

I assess directional momentum using:

• ATR of swings
• The average volume within the swings, and
• The directional structure of the 30-minute, the session.

The chart below shows the decreasing ranges and volumes since January 30. (Remember that February 1 was a holiday in the United States).

The 30-minute chart below shows that since the resumption of the directional move on January 30, we have seen during the day session:

• Choppy price action on January 31 and February 5.
• A directional move on February 4

The vertical lines mark the day session.

In summary, we have preconditions for a tradable top. I shall stay out until I see either confirmation of a down move or a resumption of upward directional momentum.

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