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Mongo - we pretty much take it day by day, but our IT trend, as we define it with a proprietary MACD/Slope indicator, is still down, although it does appear to be in a bottoming process (i.e. slope getting less negative). However, as we all know, in severe OS situations as are often encountered in bear markets, there can be tradable rallies. Today perhaps was one of them, if you were astute enough *and* had the courage to go Long at the open.
In a macro/fundamental sense, I simply do not see how the market can mount any sort of sustainable rally in the face of the withering energy prices we are seeing. In that regard, the piper has yet to be fully paid.
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
Poker - Since the system is based on the NDX (plus some help from the broader Naz breadth data and various P/C ratios), the Qs and related derivatives (QLD, QID, and the E-mini NQs) are all directly applicable, so the choice of trading instrument is a personal one based on how much heat one can stand when the market moves against the signal. Personally, I like the NQ futures (~24/6 tradability and Stop protection), plus the advantages that accrue at tax time, i.e. just the bottom line, no wash sale crap to deal with.
But be advised, this is *2X* trading, day in and day out, which requires some pretty hefty grapefruit.
Poker - Just like everyone, we have our moments. We're up net 75.85 NDX pts so far this week, but of course, many will say that is just luck. At this rate, *if* we could do it all the time, true financial security and a lavish retirement lifestyle might not be so elusive after all.
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
John - No, sorry, I don't have a StockCharts subscription. However, this is an interesting concept that I will watch. Since we track the NDX, we found the VXN to be of better utility than VIX, especially for shifting between a two different sets of stops. It is really rather intuitive when you think about it, but in times of high volatility, loss stops should normally be wider and profit stops tighter (i.e. you wait a little longer for the market to turn if your position is down, and if the market does offer you a decent profit, you book it before the market can take it away from you.
John, I was not familiar with that symbol. What is its particular utility?
It is a known fact that institutional traders (i.e. the Big Boys) comprise ~ 50% of the market volume, so the market seldom goes in any direction that they aren't going also.
Various p/c ratios have risen above their historical Short thresholds this AM, so we may have one of Poker's classic Acapulcos in the works for today.
Yes, for now, but it can change at the open on a daily basis.
Poker - Actually, we go both ways, so the last few days we have been Long for net +24 NDX pts (1.24%) on the current trade, and +6.12% for the month...
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
John - VXV or VXN?
No joy, unless I have to pay first.
Not yet, been enjoying the ride down...
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
Isn't that like saying if we had some ham, we could have some ham and eggs, if we had some eggs?
I never got a response when I tried to register either.
Well, I hope you are right, because Merlin is with you.
As predicted, the reversal occurred between ~ 1300 and 1330...
I really don't care whether you "got it" or not, but FWIW...
http://alt-usage-english.org/excerpts/fxwholec.html
Perhaps my usage is incorrect. I thought it meant "basically from scratch", i.e. from nothing other than your own ideas.
Poker, the anti-nuke lobby succeeded in killing any further expansion of an industry that we invented, while the French get ~ 80% of their power from nuclear. Perhaps paying the OPEC countries $600B annually for an uncertain supply of oil to feed our habit will eventually compel us to get off our collectives and apply our technology to solve the problem, but then OPEC will just reduce the price and everyone will be rushing out to buy Hummers and other behemoths again. The fact is, we are our own worst enemies. They can't give away an SUV these days, but the car dealers are greedily slappping huge premiums on their more fuel efficient models. Nothing like giving the consumer a break.
Poker, your long term outlook for the S&P may very well be close to what unfolds, but I would attribute that to your astute understanding of macroeconomic conditions and their effect on the markets rather than a preordained EWP outcome.
I think someone here got it right, re: a possible commodity price bubble. If we are in one and if it bursts, nothing will hold this market back from roaring to new highs, but if high commodity prices are here to stay due to increased competition for limited supply from burgeoning third world economies, then we are all in for *major* changes in our lifestyles and especially our energy consumption practices. The automobile as we know it may become a museum relic.
What is maddening is that we have more than ample energy reserves within our own domain, but the Congress and environmentalists will have succeeded in driving this economy off the cliff with their restrictive legislation and proposed carbon taxes. And then they have the gall to lecture the oil company execs on the high price of gas.
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
JLS, no, I didn't say that EWers and Fibonnacci followers make the market exclusively, just that to the extent that if enough people believe in a particular thing, it *can* have a measureable effect. Poker can tell you that I am definitely *not* a believer in EWP. However, you make very good points on the various funds' participation and contribution to the daily shenanigans.
JLS: Regarding Fibonacci ratios, it matters not a whit whether the market all by itself behaves according to the predefined limits, but to the extent that market trading programs or individual traders believe in them and exercise buy and sell decisions based on them, they tend to become self-fulfilling, and while it is not a hard, provable scientific theory, the empirical evidence is that it happens fairly regularly. In fact, the same could be said of EWP. If enough traders believe that a turning point has been reached and they switch positions accordingly, it will make the prediciton a reality. As Pogo once said, "We have met the enemy, and he is us", i.e. all of us collectively *are* the market.
Not sure how that relates to my original question, but yes, it is good to see Steve's system doing well and for Steve especially to be receiving the much deserved recognition for all his hard work. Creating a workable system out of whole cloth is no easy task.
Kind regards,
-CAPT J
"What would you attempt to do if you knew you could not fail?"
kenwong - I see your old CS friend has become a regular poster on Poker's board. Like Hillary, is she trying to re-invent herself yet again?
...and isn't it nice that they can vote themselves a pay raise at our expense any time things start feeling a little too tight, when it is their policies that created the squeeze in the first place. Our energy problems are not because we are using too much, but that the politicians have hamstrung the production side with inaction for decades. This economy, and the stock market in particular, simply cannot sustain $5.00/gal gas.
One thing we have learned the hard way is that certain market conditions at times favor certain styles/systems, and at other times, the very same system can suffer the Kiss of Death. Such is the random vs statistical nature of the market.
John, for TMG, we get half hourly intraday data for the major index options from CBOE/CME, but other than the final EOD values, I am not aware of a source for historical intraday numbers.
John, ...
Well, congratulations, Dad! Baby girls are special to be sure, but until they are about two or three, they are just babies, and to a baby, all they know is that they are happy, or not happy (or asleeep!), and are not shy about expressing their feelings.
Glad things are working out in your investing, and after so much time invested that Steve is finally reaping some rewards for all his hard work. After a good recovery off the Feb lows, TMG is off ~ 2.3% from its 30 day high about a week ago, but our integrated Stops have provided a much needed security blanket/safety net as the market decides its next big move. As a fellow Excel weenie, if you are interested in going the automation route, I might be able to give you some pointers. *If* everything works as it should, pretty much all I have to do now is turn it on in the morning and do the Copy Downs/Changeover after the final data updates are in.
Like Clint said, "every man has to know his limitations". I wouldn't say there was so much of a failure, but there were modes of market behavior for which the system was not well-matched, similar to the months it took for the market to come around finally to the long predicted e-wave decline.
Hey, Ken, good to see you active and posting again. Hopefully, the condo and computer problems are just a bad memory.
Would you be interested in coming back and doing some website work for us on TMG???
Send me a private email if you don't want to discuss this in open forum.
Made me a 'kewl' $5K today...
Poker - That's what I love about e-waves. Whatever happens, the theory can be made to fit, very similar to backtesting...
Dan, just like it was for the author of the piece, I doubt that it was immediately apparent to most, i.e. it took about 6 months of scratching your head and wondering what was up with the market and why your system wasn't doing as well. Hindsight is better than no sight at all, but it is still true that TA does its best job of telling you what the market has already done.
I know you have not gone the automation route, but you really owe it to yourself to look into it, especially now that you are public. In that regard, with Tarun's help and a little self-study on VBS and macros, I have been able to take Merlin to a new level. Unless there is a problem with one of the queries or bad data, the program now pretty much runs itself. Just turn it on in the morning any time before the market opens and let it do its thing through the final signal posting at 1800. There's one totally cool feature (Worksheet Change) that triggers a macro when a particular target cell value on a sheet changes, which is very useful for adjusting stops intraday or sending an email notification if a stop is hit (or anything else you can think of). The startup could be automated as well, especially with the auto-power on feature of the Merlin host computer, but I like to make sure everything is set up properly and the manual start enforces that nicely. Using C2's API, we also have all of the trade entries on a "button" status as well. We did have them completely automated at one point as well, but then a couple of bad query refreshes caused erroneous trades to be entered that Matthew would not fix retroactively, so that needs continued adult supervision as well. The EOD updates still require manual intervention, but again, that just enforces that everything is set up properly for the next day (i.e. all the Copy Downs and Replace with Values). Also, with the GoToMyPC product, the live program can be monitored from any computer on the Internet. Not quite the ultimate self-licking ice cream cone, but getting pretty close.
Steve, one additional note on our implementation of the R3, the lookback (or persistence) periods for each index is different, i.e. SPY=2, SPX=0, DJX=1, CME SPX=0, and for the reverse R3, the values are 0,5,1, and 0 respectively. Of course, those values may be unique to the R3's contribution to the Merlin summation algorithm, e.g. =Q5677*$Q$27+R5677*$R$27+S5677*$S$27+T5677*$T$27+U5677*$U$27+V5677*$V$27+W5677*$W$27+X5677*$X$27+Y5677*$Y$27+Z5677*$Z$27+AA5677*$AA$27+AB5677*$AB$27+AC5677*$AC$27+AD5677*$AD$27+AE5677*$AE$27+AF5677*$AF$27+AG5677*$AG$27+AH5677*$AH$27+AI5677*$AI$27+AJ5677*$AJ$27+AK5677*$AK$27+AL5677*$AL$27+AM5677*$AM$27+AN5677*$AN$27+AO5677*$AO$27+AP5677*$AP$27+AQ5677*$AQ$27+AR5677*$AR$27+AS5677*$AS$27+AT5677*$AT$27+AU5677*$AU$27+AV5677*$AV$27+AW5677*$AW$27+AX5677*$AX$27
Why TA May Not Be Working
If your TA-based system is not performing as you think it should, perhaps you should consider this...
“Last night I was reading a bi-weekly newsletter written by Tom McClellan, a well-known and respected technician, and something he discussed smacked me square in the forehead. This is something I should have been thinking about over the past 6 months.
On July 5, 2007 the SEC eliminated the Uptick Rule. The rule stated that you could not sell a stock short unless and until there had been an upward change in price, an uptick, which would keep the sellers from driving the stock down simply by shorting it. That rule had been in effect since 1934, and was intended to help prevent some of the kinds of dislocations that occurred in the crash of 1929.
Subsequent to July 5, 2007, we have had a very different stock market than the one seen during the entire look-back period of my studies, dating back to 1993. For example, from 1993 through July 5, 2007, there were 11 "rare one-day buy signals," which pop up on my screen when the market internals wash out to an extreme. That's less than one washout day per year. But since July 5, 2007 there have been 10 more of those rare one-day washout sessions. That's a rate of almost 20 per year, more than 20 times the rate during the prior 14 years.
I have been aware that the efficacy of the System's signals had deteriorated since last July, which is why we have been less active in trading the System's signals. But this new, if tardy, recognition of the Uptick Rule is terrifically important. It means that there is reason to expect that the change in the market since July will be ongoing, and that, unless the Uptick Rule is re-established, we can expect the market NOT to revert to its former behavior.
Re-establishing more positive trading performance will now likely require re-vamping our methodologies with an eye toward understanding how the market is likely to behave in the absence of the Uptick Rule.”
John, My Friend, how *are* you??? Like I told Poker on his board, I have mostly been keeping my head down and taking care of "b'niss" on the TMG site and Yahoo board, but when things are going well and all the whining subsides, I get lonely. I think you would find that Merlin today is quite a different beast from when we started (and significantly better, we think). The market is a cruel taskmaster indeed, and had some hard lessons to teach us, the most important of which was that the market may not always be "right" relative to its historical norms, but there is nothing that says it has to be, and you had better be able to handle, or at least limit the damage from, the wild swings caused by the random event or unexpected economic development. There's a more extensive update posted on the TMG Support board if you are interested:
http://investorshub.advfn.com/boards/board.asp?board_id=7383
When you left us you had some intriguing ideas for a system that you were working on. I would be very interested in hearing how that has turned out.
Steve, the effect is not as pronounced, but we have also discovered that there is a slight benefit to a reverse R3 rule, i.e. a Long vote when the p/c falls below a minimum value. Additionlly, we vary the strength of the Short vote based on how many of the individual p/c values are above their Short thresholds, which are unique to each index. Through our optimization process, we have found that the individual threshold values vary widely among the indices.
I have thought long and hard on the subject of e-waves, and in the final analysis, I have come to the conclusion there may not be that much difference in our approaches. If you plotted all of the indicators we use in Merlin on the same graph, I don't think that the summation of all those values would look too much different than your e-waves. The major difference of course is that we do it with numbers as the market trading unfolds, while with e-waves there is a predefined pattern that you then attempt to match to the market. The problem of course is that both systems tell you the increased likelihood that something is about to happen, but without telling you precisely when. When we are at the OB and OS extremes, when all the indicators say it's time for a reversal, the market can stubbornly grind into the stops for a few more days before succumbing finally to the market forces.
The bottom line is that it is your results that count, but to be certain, if your analysis shows that you have a winning strategy, you must also have the patience and discipline to stick with it through good times and bad. Unfortunately, many traders treat their strategies the same as they do their trades, buying high and selling low. Sometimes you have to ride out a few losers to be there for the big winners, and you must have the patience to allow the statistics to work for you.