SMT Divergence

Question 1

Does SMT apply to everything trade-able?

Answer 1

No, just to the index pairs (SPX500 and NSQ)

Question 2

Explain bearish SMT divergence.

Answer 2

Say the SPX and NSQ are both in uptrend but the SPX firms a lower high, indicating a break of structure to the downside, which is then confirmed by an ifvg or some other confirmation confluence, because the twi are tethered, we know that the NSQ will follow so we take shorts on it as it is the lagging index.

In short, it is when one index makes lower highs while the other continues in uptrend.

Question 3

Explain bullish SMT divergence.

Answer 3

Say the SPX and NSQ are both in downtrend but the SPX forms a higher low, indicating a break in structure to the upside that is then confirmed by an ifvg or some other confirmation confluence, because the twi are tethered we know that the NSQ will do the same so we enter long positions as in this case the NSQ is the lagging index.

In short, bullish SMT divergence is when one index forms a higher low while the other continues to form lower lows.