Moving On With The Averages: The LEMA

I was never really a moving average guy… But then came the bear of 2011.

It was crucial for me to figure out the sudden transition, the 2 weeks of relentless selling and the 6 months of hopeless recovery. I could not proceed until I had done this. I lost 150k on 3x leveraged TNA etfs, and an additional 60k on trying to play weekly call options on SPY on three different occasions. Little did I know about the bear lasting 6 months.

Ultimately I found that the LEMA was responsible for giving support, and although an EMA does not seem to make sense when it comes to large numbers such as 23×36, it served me well since and I kept it. I often refer to it as a Reset; the market makes a run for it every time to correct out of an oversold/overbought condition and go neutral. While it is at it, on a second touch most likely a reversal would take place.

To make it more visible, I had 3 colors based on the highs, the closes and the lows.

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As you can see on the image below, ES pulled the breaks towards the LEMA, if I displayed some cloud around it, this was the first touch on it, and the second would be somewhere in the middle of the LEMA for a complete reversal.

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The next image shows a H&S turn at an oversold Comfort level – and has my Even Wilder RSI indicator on the bottom.

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At times I would display simply a cloud for eliminating many of the unwanted lines.

828 is the number it all started with, and on the daily time frame. But this thing seems to be present everywhere, on every time frame.

If the current time time frame is 1h, the 828 is the associated LEMA. Yet, you can display the 30 minute LEMA at once, which would come out to 414, and the 2-hour LEMA that would be 1656. As you can see, on MT4 I’m only displaying the highs and the lows. Rememer, there is a cloud around them.

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You can see that the LEMA configuration is bullish.

If your base is 4h, the following LEMA’s are the 2-hour, 4-hour and the 8-hour. And yet again, bullish config.

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The daily has a semi-bearish configuration with a cross over having taken place recently.

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While the weekly looks like a mess with a potential turn taking place, it is also in a neutral zone, and if the LEMA congestion gets cleared, little would be in the way of the progress. Not much other than the edges of the imaginary clouds.

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…and perhaps the upper trend line…

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Do you see  anything strange on the monthly LEMA configuration?