S&P500 Intra-day Patterns and Sensitive Time periods

 

Intra-day Patterns – These patterns should be used in conjunction with our existing S&P measurements, strategies and intra-day approaches highlighted and discussed in Video Series V and the accompanied intra-day manual.

 

Intra-day S&P500 Patterns

 

1.      The “W” pattern (W-pattern) – This is a bullish pattern.  It can form anytime during the day.  We generally respond to patterns that form between the 9:30am EST open and 3:30pm EST.  The W-pattern may also include a “handle”.  The handle is located on the right side of the W-pattern.  See the illustration below in figure 1. W-patterns that form in the last 45 minutes of trading tend to be less predictable.  

 


Figure 1

 


Specifics:

Not all W-patterns will contain the right-side handle. The handle is NOT a requirement.  Generally speaking, the most suitable W structures for trading (long) are those with an equal to higher right-side low.   There are exceptions however.  The W-patterns that form in conjunction with new intra-day lows, as well as those that form with a new weekly low or contract low can form with a lower right-side.  This can be a strong buy signal!  Studies of the data show that a market will often come down and challenge an important low, slice under it, causes the masses to give up on the market, and then turn on a dime!  

 

 

 

  1. The “M” pattern (M-pattern) – This is a bearish pattern.  It can form anytime during the day.  We generally respond to patterns that form between the 9:30am EST open and 3:30pm EST.  M-patterns that form in the last 45 minutes of trading tend to be less predictable.  A real market example of the M-pattern is shown in figure 2 below.

 

 


Figure 2

 

 


Charting intervals for intra-day trading:

During the day I use one (1) minute charts for monitoring the S&P for patterns.  The one (1) minute charts are used for pattern recognition and tracking of intra-day swing high and swing lows only.  If I am looking at any indicators, I typically use 5-minute intervals (5 min charts).  I also look at 10 minute and 30 minute charts and of course the end of day charts (from our site). My main focus during the day in the S&P is on the 1-minute and 5-minute charts.  

 

 

 

 

 

 

 

 

W and M patterns form under various market conditions.  There are two different formations within each pattern. 
They are as follows in table 1

 

W-Patterns                    Specifics

M-Patterns                Specifics

Common left-side formation

Left dip lower than right side.

Common left-side

Left peak higher than right side.

More rare right-side formation.

Right side dip lower than left side.

More rare right-side formation.

Right side peak higher than left side.

 

 

 

 

        Table 1


Examples of each pattern are shown below

 


Example 1 shows the more common left-side “W” formation. Note the left side dip is lower than right side in this “W” structure.   Example 2 shows the less common right-side “W” formation.  Note in this formation the right side dip is lower than the left side!  Example 3 shows the common left-side “M” formation.  Note that the left side peak is higher than the right side peak.  Example 4 shows the less common right-side “M” formation.  Note the right side peak exceeds the height of the left side peak in this more rare “M” formation.

 


As a general rule of thumb, patterns shown in examples 2 and 4 should be considered very carefully before entering any position based in whole or in part on this pattern.  Typically, examples 2 and 4 are most significant around intra-day extremes (forming at an intra-day high or low for example).  They may also be considered for an entry around a key time (key times are explained below). 

 

Patterns are very useful for entries. They provide an ideal (logical) stop (note stops shown above).  However, the optimum approach is to use the patterns in conjunction with other data, information and/or indicators as described in video series V and in the associated S&P Trading Manual. 

 

 

 

 

 

Sensitive intra-day time periods in the S&P500

 

 

Through many years of tracking and trading the S&P500 and logging my observations, I have found the market behaves differently depending upon the time of day.  Therefore, I have broken the market down into 3 separate specific time periods.  I call these time periods “zones” and/or “legs”.  Each zone or leg is unique.  The price behavior in leg 1 and during the dead zone may also dictate how the market behaves in leg 2! 

 

The times for the zones are listed below in table 2.  All times are in Eastern Standard (EST).

 

Zones/Legs

Time of Zones

Key Reversal Times of day

Zone / Leg 1

9:30am – 11:00am

*10:15am – 10:30am

Dead Zone

11:01am – 2:00pm

11:00am - 11:30am

Zone /Leg 2

  2:01pm – 4:15pm

2:00pm - 2:30pm

* 10:15am time used to confirm gap and run days.

Table 2

 

Below is an example (figure 2) of the zones occurring during the course of a normal trading day.  Also note the extension of the leg 1 trend into leg 2.  This is one of things we look for, and an example of using leg 1 data to anticipate leg 2.  Note the dead-zone between leg 1 and leg 2.  This is the thinnest time of the day.   


                                                                            Figure 3