A Finger on the Nitrous Button
Yes, my Motorhead friends out there know exactly what I am talking about; the rest of you
put on your seatbelt and let me explain. Nitrous Oxide Systems (NOS) have been used for decades to mix with the gas in cars to add a burst of power when turned on. The power you feel is immediate and eye opening to say the least. Typically NOS is used in special situations where you need strong acceleration when you are already at very high speeds ( I have no idea why anyone would every want that 🙂 ). The problem is if things gets out of hand and are not monitored correctly it can melt down your engine. Why did I just explain all that?
When I was looking at the TP Weekly Chart last night I noticed Mr. Market has his finger on the NOS button. That NOS button for Mr Market comes in the form of the 9 period simple moving average (9sma) of the 14 period RSI. The basic explanation was originally part of my RSI Series talking about Moving Average on RSI. In the post I explain how to use the 9sma on RSI to help gauge the strength of a trend as well as spot when the markets are about to accelerate. Andrew taught me to look for acceleration in price when the 9sma on RSI moved above 60. Normally if 9sma on RSI is above 60 then the actual RSI is soaring which has everyone calling for a reversal which makes this signal even more fun. As with every signal it has failures which your risk management plan should take care of, but in my experience this signal is worth watching for. These are great signals on the daily chart and can be found quite often, but as with many indicator signals, when we get them on the Weekly chart we should take special notice. Below let’s take a look at that TP Weekly Chart I mentioned earlier.
On this chart the RSI is in the middle box in black and the 9sma on RSI is the orange overlay. Doing this makes me realize I need a blog explaining everything going on in this chart since I post them every day. I will do that this week, but for now focus on the orange line in the middle box. Both the $IWM and $SPY broke through it this week suggesting the button has already been pushed. The $QQQ is still lagging, but pointing in the right direction and could just be getting started. Just like Nitrous, the accelerated move is fast an doesn’t have to last a long time, but usually covers some distance from the signal. This is a weekly signal, so daily volatility is not out of the question, but right now this chart is suggesting you strap in, hold on and enjoy the ride!
Just make sure you have good brakes just in case.
Good Luck, it is there for the making!
If you like what you see, follow me on StockTwits or Twitter.
