Merriman Market Analyst [iPhone]

The MMA App is a market timing tool that provides weighted value (WV) scores based on Sun/Moon historical studies of reversals of at least 3%. The higher the WV, the greater the frequency that a reversal of at least 3% has occurred previously, and thus the higher the probability that a reversal will occur this time too if the setup is in force. Alerts are provided when the WV for a particular 1-3 day period is greater than 138.

The Solar/Lunar reversal dates work best when the “trading setup” is in place. A trading setup is in place when an isolated low or high form in the solar/lunar reversal zone. For video instruction on this, please visit our YouTube channel. The following steps describe the setup that should be in place for maximum trading benefit:d

The weighted value of 138 or higher is most desirable. Anything over 114 should be considered “higher than norm.” Above 138 is “high.” Above 160 is “very high”. The higher the score, the more frequent it has correlated with a reversal in the past.

The dates given are based on the position of the Sun and Moon at noon that day. However, since futures markets trade nearly 24 hours, from Sunday evening through Friday evening Eastern time, traders should also apply weighted values (WV) to the day before and day after those shown in the app as well.

When entering a solar/lunar reversal zone, the next step in the setup is to see the price take out the low or high of the previous day. If it takes out the high, you are looking for a reversal down (“picking a top”). If it takes out the low, you are looking for a reversal up (“picking a bottom”).

The setup is confirmed when the next day’s price is lower than the prior day’s high (isolated high) or higher than the prior days low (isolated low). In other words, an isolated high is a day in which the high is higher than the day before and day after. An isolated low is a day in which the low is lower than the day before and day after. We are looking for isolated lows or highs on solar/lunar days with high weighted value scores.

You do not want to wait for the setup to be confirmed because much of the move will be over by then. Once the market is in the solar/lunar reversal period and takes out the low or high or the prior day, you must be prepared to initiate the trade. For this, you need to pick a price with a reasonable stop-loss. The following factors can help you choose an entry price:

Use intraday (5- 30, 60-minute) momentum indicator to determine if a market is overbought or oversold. For instance, you may want to see a 30-minute stochastic or RSI below 20%, or a CCI below -200 before buying. With that, you may wish to also see a 5-minutes stochastic or RSI below 10%.
Look for divergences. For instance, if buying, perhaps the 30-minute stochastic is below 20% but a lower stochastic was noted earlier on a low. Now the price is lower but the stochastic is not lower, which is a case of bullish divergence and a strong signal to buy in the solar/lunar reversal zone. You can do the same with RSI and CCI studies. A lower price with a higher momentum indicator is a case of bullish oscillator divergence and a buy signal if the price is lower than the prior day and the market is in a solar/lunar reversal reversal period with a WV greater than 138.

Once the setup is confirmed, move your stop-loss up to just below the low of the move if it’s an isolated low) above the high (if it is an isolated high).

Start taking profits when 1) you reach your price target for the move, and/or 2) the technical studies indicate the market is overbought (if long) or oversold if short, using the same parameters given for the entry point. Generally speaking, we like to see a move of 2.5% or greater, but sometimes that doesn’t happen before the oscillator point to a reversal.

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