Blame the Intersecting Lines and Endpoints

The relationship of three lines determines the direction of trade in CMI 2.0 world. The CMI is either with the market or against it. Historically, there have been several instances where intersecting lines resulted in two endpoints that were basically sharing the same space. Using this historical data, the probability of a winning trade is higher when the CMI defaults to the direction of the current trade. I use a '2-point rule' or '2-point cushion' to resolve this 'same space' type of conflict.

Last Wednesday, line crossed indicating a change of trade from QLD to QID, but since the endpoints of these intersecting lines were within 0.1 point of each other, the CMI defaulted to the current trade until there is a continuation of direction on the next day. There was not so now we have to eat a 6% loss rather than packing on additional gains.

Keeping the probabilities in your favor is the only way to consistently outperform the average investor or trader. If the '2 point cushion' loses it's advantage, the system will be adjusted to reflect the best probability for a successful trade.

Let's hope there are plenty of bargain hunters in the market this week since the CMI is still bullish.