● MOMENTUM
Follow strength. Full size.
σ low all timeframes. Offense above 60% on 20D. Sectors moving together. Breakouts extend and work.
Opens strong + breadth expands → TRADE CONTINUATION
Opens weak + lows do NOT expand → BUY THE DIP — bull intact
Opens weak + lows expand → SMALL SHORT — expect bounce
● OVERBOUGHT
Do not chase. Take profits.
σ very low short term. Offense above 75% on 5D. Everyone in same trade. Participation maxed out — no new buyers left.
Opens strong + breadth stalls → TAKE PROFITS — trap forming
Opens weak + selling starts → DO NOT BUY — large players exiting
Opens weak + lows hold → WAIT — no edge yet
● CHOPPY
Be selective. Lead sectors only.
Mixed σ signals. Some timeframes healthy, some not. Neither buyers nor sellers dominant. Breakouts work in leaders only.
Opens strong + breadth expands → SMALL LONG — quick profits
Opens weak + lows expand → SMALL SHORT — quick profits
Opens weak + lows hold → FADE — scalp only
● WEAK MARKET
Reduce size. Short side bias.
σ high short and medium term. Sectors sharply diverging for weeks. Breakouts fail. Breakdowns extend.
Opens weak + new lows expand → MOMENTUM SHORT
Opens strong + most sectors still red → SELL THE BOUNCE
Opens weak + lows do NOT expand → FAILED BREAKDOWN — scalp only
● OVERSOLD
Buy weakness. Fade panic.
Cross-sector avg % above 50D MA below 25%. Stocks stretched too far down. Bounce edge active per Dr Steenbarger — next 5 days historically ~4x normal returns.
Opens weak + lows do NOT expand → HIGH PROB REVERSAL — buy now
Opens weak + lows still expanding → WAIT — not yet, more selling coming
Opens strong + breadth expands → CONFIRM LONG — add size
WARNING — if WEAK MARKET also active: oversold in downtrend. Bounces fail more often. Reduce size. Wait for lows to stop expanding first.
"In volatile markets — size DOWN. Volatility is already sizing up your positions. The faster the market moves, the slower you should make yourself to adapt."