SP500 & QQQ & IWM Daily Swing Trade and Investment Entry Optimization

I use the Trading strategy and checklists below to build a picture for the short term direction on the SP500, QQQ (NASDAQ 100 Index), and IWM (Russel 2000 Index)

Check the 5 day MA's on the SP500 and related Indexes

To swing trade the SP500 you would look for a swing something like the below where the SP500 chart (see top left chart below) price moves from below the 5 day MA to above the 5 day MA and look for the 5 day MA to be sloping up not down.

QQQ (US tech) and IWM (US small cap) are also shown below and can be swing traded in the same way. The SPY (SP500) is also often lead by the risk-on ETF's so you might look for QQQ, IWM, and SMH (semi-conductors) to be swining/trending in the same direction as you want to trade.

Check the trend on the 2 biggest stocks in the SP500

Currently Nvidia and Apple are the 2 big boys of the SP500. Check their daily trend as well as the 5 day MA in the same way as above. The chart below is Apple on the daily charts as at the time of writing. So I would be looking for a move back to the upper resistance line and ideally a breakout from the level.

Check the current short term 10Y - 2Y yield curve trend & yields & the dollar

The SP500 market direction is INVERSELY CORRELEATED TO 10Y - 2Y US Bond yield chart: -

The simple yield value for the 2Y, 10Y, and the US dollar (see the DXY ticker) to be heading in the opposite direction to the SP500…

The Risk Free Rate of Return - The US 10 Year Yield

The 10 year duration Us Government bond is the measure by which all other investments are valued as this is viewed as a 'risk-free' return due to the US government being deemed as never going to default on this bond.

It is of course linked to inflation so if inflation goes up in any meaningful way then the 10 year yield would also go up meaning the price of the bond would go down. The 10 year yield tends to also have an inverse relationship with the SP500. This is admittedly a bit of a market timing, or shorter term trade/investing indicator, but as can be seen in the chart below, short term episodes of rising 10 Y US bond yields do coincide with declines in the sp500. There are times when the yield is going up and the stock market going up which can be caused by either over confidence or some other reason, but in general there is a pretty good inverse relationship...

Look for the longer term trend in 10Y yield and 2Y yield to continue up along with USD. Are they currently showing signs of divergence with SP500 continuing up whilst they are also going up…

Check the Zig Zag on the daily chart

The current short term trade (1-3 months) ZIG ZAG on the daily chart typically sees a zig or zag length from about a month to 3 months or more (see chart below). On a longer term chart such as the weekly the zig/zag length can stretch out to about 6 months or so. This gives us a rough way of assessing the likelihood of a...

• short term "swing low" where we ’buy the dip’ (especially in uptrends) , or a ...

• short term "swing high" where we ‘sell the rally’  (especially in downtrends)

The yield curve can be applied to the SP500, QQQ, or IWM.