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As long as the pols debate the issue the market will likely drift lower with the uncertainty, but as soon as a deal is done an effective floor will be in for the housing market, and this thing could then shoot to the moon, at least for the short term.
Our system uses ~ 32 different rules/indicators, each of which contributes to a weighted average that then determines the signal, since there is no one indicator that is right all the time (or else everyone would be using it and there would be no market). We're still trading, but my sense is that until this bailout mess gets sorted out and traders know the rules again, you could do about as well flipping a coin.
*Officially*, we trade once a day at the open, unless a Stop is hit.
As I have listened to all the bloviating this AM from the erstwhile and distinguished Senate Banking Committee and watched as the market has retreated from its highs, I think there is a very real possibility that the pols will so hose this up that it won't have the chance of a fart in a high wind from doing what is intended.
I've always heard it stated that those who do not learn from history are doomed to repeat it. We'll see if it has the legs to stand up through the PM, but so far the market seems to be drinking the kool-aid.
Long at the open after a nice two day Short gainer Fri and Mon...
As much as this potentially $1T bailout of the financial institutions smacks of socialism, it will not necessarily be that much net cost to the taxpayer. Essentially, the Government will buy the bad loans from any institution willing to take the money and submit to the Government oversight that will come with it *at current market value*, which will effectively put a floor under real estate prices as Uncle Sam becomes the Great Mortgagor for loans that should never have been made in the first place. So, the shareholders will take a hit, but the upside is that all the bad paper can then be taken off the books at a known value. But it will allow more folks to stay in their homes, and then, since Uncle has *really* deep pockets (i.e. yours and mine), he can afford to hold those assets until they can be disposed of or renegotiated, hopefully for a profit, as happened with the RTC. The downside of all this can be clearly seen if you have checked the price of oil and other commodities today. You don't throw around $1T in new Government spending without affecting the value of the dollar.
Next, they'll be issuing reimbursement checks for bad crack cocaine purchases...
Hey, we should all volunteer to pay 100% of our income for one year to fix this mess, because it would be the "patriotic" thing to do (but then, it probably wouldn't fix it and would just whet the appetite of the big spenders in Congress). Oh, and while we're at it, let's impose even more usurious, confiscatory taxes on business, and restrict foreign trade to protect the low paying jobs of those who never had the ambition or learned to do anything more productive. If the Chinese can make brooms more efficiently and cheaper than we can, why should we subsidize U.S. workers to make brooms just because that is what they choose to do?
Hmmm, is this board completely *dead*???
Intraday SPX P/C is .9
The big three index futures (Dow, S&P, and the NDX), although I am most concerned with the NQs, since that is what I mostly trade. At this point, there's a good ~ 35 pt recovery off the premarket lows. The NDX seems to be doing a little better than the others today, probably due to a rotation out of financials and into big techs. Overall, Naz breadth still sucks...
The housing debacle claims yet another victim. Blood in the streets this AM with the bankruptcy of Lehman, and now Merrill Lynch is on the ropes, which says the Fed should have left well enough alone with the Bear Stearns deal. Hank must have finally come to the realization that he couldn't save them all. These are big chickens coming home to roost from all the overleveraging, mismanagement, and excess liquidity of the last several years, but IMHO will ultimately be good for the market. Of course, that is faint consolation for the Lehman/Merrill shareholders.
Futures reaction is way overdone and already off the premarket lows. Minimal disruption to oil facilities by Ike. Crude is off almost $6/bbl.
Perhaps, perhaps not. Maybe it was just a day of consolidation after the bonzer Thu, but it closed back within spitting distance of the previous high. However, with the gas price gouging in the wake of Ike, it is hard to know how the market will read it. Even though the damage in the Galveston area was severe, it seems most of the oil and refinery facilities suffered minimal damage.
We got some southwesterly flow associated with the hurricane starting this AM and had to bring the boat in with ~ 20 knots of wind, so I missed whatever may have happened with Lehman. That could also affect which way the market goes in the early trading tomorrow. Remember, I said barring any exogenous events...
That's what makes it a market...
Our proprietary MACD Slope indicator has just about bottomed, which, barring any more news to drive the market lower, points to a short term recovery.
Gloria - Thanks for the kind words. You are probably happy with your own method/system, but if any of them sign up (on the TMG site, not C2), if they mention that you referred them, we'll comp you a free month for each of them that stays for a month or more.
For at least through tomorrow, unless a Stop is hit.
Well, the big gap down on top of the selling of the last three days smelled of manipulation. However, the daily RSI 4 could just have easily gone to 2 or 3, but we would have held our Long, which is now nicely green, nonetheless.
In spite of the big gap down this AM, it doesn't take a high degree of prescience to figure out that with the daily RSI 4 in the single digits for four days in a row, bottoming at an astoundingly low *4.95* two days ago, a countermove of some significance was in the cards. As Poker has said before, there are many paths to profitability in the world of trading, so one should go with whatever method they believe in and that works for them.
Poker - I know, sometimes I just can't help myself, but when waiting for the market to come to its senses from such extreme levels, what else is there to do??? <G>
JMHO, but wave counts are subjective at best and also are modifiable retroactively, so they are seldom outright wrong. The Congressional Record bears little resemblance to what actually occurred on the floor since the members routinely reserve the right to "revise and extend" their remarks.
North - One of the biggest problems is that many subscribers do not understand and/or appreciate normal statistical variation, and often demand that over any arbitrary time period (e.g. the time of their membership) that the system performance *must* be equal to or better than the historical performance, even though the statistics virtually guarantee that there will be flat to down periods. Accordingly, when the statistics do turn negative for a time, lacking the patience and discipline to allow the statistics to work for them or perhaps the courage to make the necessary trades, they often declare that your system is broken and leave with shattered expectations, essentially making the same mistake of many novice traders of "selling at the bottom", and then they continue their search for the Holy Grail that will make easy money for them with little or no effort on their part.
Depending on the game, the Vegas edge is ~ 2-6%, but the House knows that the more times the game is played, the more the results will match the statistical prediction, so they don't get upset and happily pay off when someone by just dumb luck hits a streak or a jackpot. It is the ones who have an edge with a "system" that the House gets *very* upset about.
In a nutshell, what this means is that if you follow the consensus of the "experts", you will be wrong more than right and hence probably lose money.
Hmmm, I don't think the market was listening. Qs traded AH almost to 44...
Ah, but you don't understand, my good man. The Nanny State mentality subscribes to the theory that the average American can't be trusted to do the right thing with his money, so it becomes the role of the Government to take his money from him by force (i.e. taxation) and give it to *everyone in the form of entitlements, all the while trying to convince everyone that this is a good deal for the hard working folks who earned the money in the first place.
RB - I guess it depends on what you mean by "short term". Our system (TMG) is by definition short term, but to us that means daily, since that is the signal frequency. We liken it to driving in fog with just your low beams on. What I *think*, which by the way is worth what you pay for it, is that since early Aug, the market has only seemed to care about the price of oil, and with few exceptions has moved counter. The little bump-up prior to today has just been the speculators trying to profit from the hurricane scare, and as soon as that has subsided, will again seek its own level re: the significant demand destruction we saw at the $4+ level. That will help the economy longer term, but there are other significant hurdles to overcome. While I don't agree that it will be as dire as Poker says, I think there is still more pain ahead. Until housing prices bottom, all the credit institutions that have mortgage backed securities will continue to have to write down debt (i.e. their collateral is a depreciating asset), and the consumer, robbed of his home equity piggy bank, will have to cut back drastically, especially on the bigger ticket items, or default on his burgeoning credit card debt.
The final nail in the coffin will be if the Dems get control of the White House and both Houses of Congress. The country might not *ever* recover from damage they can do in four years unfettered by adult leadership. The thing is, I don't disagree that almost every idea they have has merit from a humanitaritan sense, but what they never say is how much it will cost and who is going to pay for it. And for those who will benefit, where is the personal responsibility/accountability for their situation in life, or should all this simply be a birthright? It is generally true that they think they know better how to spend your money than you do, and it normally benefits their constituents more. I call that tantamount to buying votes, but, hey, it is the American way. Instead of the Land of Opportunity, they want us to be the Land of Entitlements. No wonder we have trouble keeping the illegals out.
Sorry, Poker, for the political commentary...
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
http://investorshub.advfn.com/boards/board.aspx?board_id=7383
Perhaps it is my imagination, but didn't we close up for the day???
RB - Since you asked, some personal information is in my profile...
It is the power of Excel that allows one to accomplish computational tasks that would have been unimaginable before the advent of the PC. You can trash Bill Gates and MSFT all you want, but the value of the MS Office package and Excel in particular is just incredible. The approach we employ is to allow the market data itself to define the values of our various rules and settings, and going forward, to do that relatively frequently so that our composite program algorithm remains as well tuned as possible to how the market is trading most recently (e.g. there was a marked shift in the market's trading behavior with the elimination of the Uptick Rule in July 2007). The ability to see how a change affects the long term and short term results virtually instantaneously is an extremely powerful capability and removes the subjective biases that "recency" introduces. Many seemingly good ideas fall by the wayside for failing to pass muster in the back test. Specifically, given that our MACD/Slope implementation is a viable technique for defining IT Bull/Bear conditions, and for further defining which rules should contribute in those conditions and how much, it is the historical market data itself that defines which EMAs (i.e. 10, 66) and smoothing periods work best.
True enough. It only matters that whatever method you use, it works for you.
We also use probabilities also, but in perhaps a more defined, quantitative sense. Anything with a discrete probability of > .5 is "most probable" (assuming the discrete probabilities of any alternate outcomes are less) , but if the probability of an event is P, it should be clear to the casual observer that by that definition, the "most probable" event will be wrong (1 - P) x 100 percent of the time. I think that saying something is "probably" right has nothing to do with the rigorous application of statistics, but rather is more of a statement of belief.
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
We use a default value of 9 as well...
RB - It is a 10 day, 66 day Moving Average Convergence Divergence indicator. The MACD itself is a histogram of the difference between the two EMAs. MACDs are often better than single or double EMA crossovers in that they show a trend change much more quickly. For example, at a market bottom, the MACD typically exhibits a local minimum (max negative), but then begins to increase, indicating a new uptrend has begun, when it may take several more days for the EMA crossover to occur. Moreover, the slope of the MACD, which if you recall from your calculus is just the instantaneous rate of change of a function, tells you precisely how fast the MACD is changing. For our purposes, we further smooth the slope to avoid whipsaws, but it actually begins to flatten out, e.g. gets less negative/positive, as you near an IT bottom/top.
Hope this helps...
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
Yeah, funny (strange) how the market so often doesn't do what it is *supposed* to do, isn't it?
Also, I don't understand how we could have been in a downturn (your 8/13 pronouncement) if the turn had not yet occurred.
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
I agree that it may be starting the process of rolling over, in that the 10,66 MACD of the NDX was less today than yesterday for the first time since 7/24, but until the slope of the MACD (instantaneous rate of change of a function, smoothed over an 11 day period) actually goes negative we are not quite there yet. If commodities are collapsing, how was it that oil was up almost two bucks today?
I make no qualitative or quantitative judgments on your calls. They are what they are and anyone can make their own judgments as to their long term value or veracity. I was just trying to illustrate by my coin flip example that the nature of statistics is such that one should not attribute too much credence to a seemingly implausible string of events, or even a single occurrence for that matter. The probability of an individual getting struck by lightning is exceeding low, but as Expected Value (probability of a single occurrence multiplied by the number of opportunities) predicts, people get struck by lightning every day. People choose to believe in many things which can never be proven or disproven (e.g. the various religious dogma), so it really comes down to what one can live with. Ask someone if they believe in ghosts or the supernatural, and they will likely say "of course not", but those are central tenets of many of the world's religions.
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
I think right now the market is just super-sensitized to any inverse movement in the major commodities, especially oil, and it all hinges on the strength of the dollar, i.e. dollar moves up, commodities move down, and the market moves up. Even so, when extreme conditions are reached there can still be corrective movements with carryover (like yesterday and today), but I don't think your methodology or mine has an "inverse commodity price" rule or indicator. Of course, this will be true until the market finds something else upon which to fixate or worry about. We always prefer to be right, but we also need to be careful under certain market conditions to distinguish skill from luck, and we would be drinking our own bathwater if it we thought otherwise. Did you know that on a *purely random basis* (i.e. flipping a coin) you could expect to get 5 in a row daily calls correct once every 36 trading days ((.5^5)*32)~ = 1.00?
That would be my take, unless you are happy with the reply you give your kids in the car to the incessant question "When are we going go get there?", i.e. "When we get there". You deal with the SPX, and while there have been some minor divergences lately, the major indices move pretty much together. Here is a daily chart of the Qs since early July...
While we have had a bit of a downturn the last three days and today's action appears to have violated the lower boundary of the up channel, you stated categorically on 8/13 (last Wed) that the trend had changed, and the Qs promptly went on to set two new recent highs. I know that your ability to prognosticate the market far exceeds mine, but looking at the chart, I just don't see that we were in a downtrend as of last Wed, unless it was just wishful thinking.
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
It should be obvious to any student of the market that any call will be correct given enough time. Basically, the market moves between overbought and oversold extremes, with shorter and longer term trend overlays that are driven by macroeconomic, business cycle, and geopolitical events. Therefore, in my view, it is not enough to say that the market will go up or down absent the critical time component. To profit consistently, calls as to future market direction must be reasonably accurate (> 50%) *and* timely.
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
Did you see the movie, "A Beautiful Mind"? In an attempt to make order out of chaos, the human brain will often see patterns where in fact there are none. How often have you gazed at the summer sky and seen a picture of a horsey or a ducky in the clouds???
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
I have learned never to underestimate the mindlessness of the herd. It only has to make sense to them, or perhaps not at all (i.e. they move simply because others do).