Nailing the Top
Here’s Kevin calling the top after the Q’s topped on May 6th. In my reply to him, I though that the SPX would have another stab higher, which it did, but Q’s topped first.
Here’s BobD pointing out the importance of the January 7th gap in the futures as the SPX was topping on May 7th. Following BobD’s lead, here’s me suggesting that the market may have topped on the CME in Chicago, rather than the NYSE in New York.
The moral of the story is that the SPX actually comes in third, as far as importance goes. To forecast tops and bottoms, we should be watching the NDX first, and then the SPX futures. Don’t forget, the rally began when the NDX made a double-bottom back in March.
QQQQ Bear Flag
The QQQQ formed a bear-flag pattern on its daily chart last week with a sharp move down on Tuesday and Wednesday, and then a low-volume retracement on Thursday and Friday. Completion of this pattern could take the Q’s down to 32 soon. You will see similar patterns on many charts.
Stringm,
I’m playing catch-up on the posts. I won’t be able to test your code tonight but will tomorrow.
Entries and exits vary. That’s the trade management I refer to. I’m not sure the automated systems allow continuous monitoring of the trade – I don’t know. For example, entering on price crossing the 9MA with the MACD advancing upward, I would not exit if price crossed below the 9MA with MACD histogram positive (ticks above the zero line). At the same time, the stochastic slow and fast could kiss, but that would not be an exit because the MACD histogram is still okay. At first blush, it looks as if the MACD is being followed, but that isn’t the case because a buy on an MACD will be a loss if the immediate trend is down.
The exit is a variable also. If price goes above the 36MA, then that MA could or would be used to exit or a cross of the MACD trendlines (which makes the MACD histogram go negative.
Additionally, it is not required that a higher time frame is already moving up, but that a lower time frame is currently making it go up – that’s how bottoms are caught. BTW, usually when this happens, a lower time frame will cycle several times and subtly level off or move up slightly and both time frames cross simultaneously, much like the stochastics bottoming out and moving up together. Often, I catch a 1min 9,36MA cross-over when the 5min crosses over. Those are good moves.
I’m not sure how that would be coded as the trade is progressing.
More later…
George
Like I said it was just something to get on the same page with SD, and not your methodology. I did do some testing yesterday with a 9/36 MA cross on the 15. If one waits for the cross to occur on the 15 then use a 2/6 MA cross on the 5, it seems easy bigtime to snatch .20 profit out of FAS, SSO, SDS, and SRS. Backtesting for multiple possibilities is tricky. It is always easy to design one for one instance. Then when you take it further back it falls apart. I am getting a feel for what your flow is, but I am not there yet.
String
Yerk & Larry:
I really appreciate the interchange! I’ll bet both of you will agree that money stands for unconsumed goods. Larry, a producer, & Yerk, a steward of a producer’s, or one time producer’s, unconsumed goods. Potentially Yerk will not “produce” anything in his own capacity but will maximise the return on someone else’s unconsumed goods and he will do it because of the continous production of all producers. Larry, will hopefully produce more than he can consume, or at the least he must produce enough to get next year’s material and other inputs. In the macro Larry, at one time, needed the unconsumed goods of another to get started. Here’s where Yerk comes in. Larry must prevail upon the stewards of the investors unconsumed goods that he is good for a return of the unconsumed goods (money) and more in addition.
Now I take a leap. Government, unless somehow angelic, will produce nothing. In order to serve their masters the government will provide protection and other basic services but should not be “enterprising.” However, when the government becomes the stewards of their own country’s and another country’s unconsumed goods that goverment has a dual role. . . . .
for the first time in a long long while – i am tempted to initiate a small inverse etf short position. does anyone have any thoughts if i should short the open or wait a bit more ?
thanks
George
FAS will have a price cross of the 36MA on the 15 and 5 this morning. Which do you find more important the price cross og the MA, or the 9MA cross up of the 36?
String
Stringm,
I’ve done both. I like price because it gets me in earlier and if it doesn’t pan out I can still get a profit.
In the end, it doesn’t matter as long as the same method is used consistently.
Okay, will these tops turn the market around. Very strong today.
Stringm,
Is there any way to see the MAs through the candles like Stockcharts? The candles on SD block those lines.
Tks
quiet day here ? i decided to bid 49.80 for DXD…lets see if i’m filled, not too far off now.
George
Turn the candle format to a line.
String
I had this idea that there was a neckline on sp futures at the 896.50 area from last week and a potential spring forming in the 880 area on Friday. We’ll see if the 896.50 area holds as resistance – it’s up in this area a third time. The sp futures on Sunday got down to 875 before the cash index could, which gapping up this morning.
Stringm,
How do I change to a line?
Tks
At the top select chart, then style, then switch to curve, or bar which ever you like.
String
Stringm,
Perfect!
Thanks
All I hear and read are bearish comments and the market goes up like crazy. Strange.
Dressguard,
Good point.
Is this the “wall of worry” they talk about?
The SPY daily is testing its 9MA resistance while its weekly has broken through the 36MA and backtesting that MA.
The weekly is close to a 9/36MA cross.
Very bullish short-term, IMHO right now, but the overall picture is bearish because the monthly stochastic and MACD have not turned up together and it is right at 9MA resistance.
My view FWIW.
I forgot… due to the monthly not meeting its requirements, “normally” there will need to be another weekly cycle(s) for its MACD to be able to give a buy signal.
All things being equal… which never happens.
The last SKF gap down was filled – finally. Perhaps that is an omen to today’s gap down.
Nah!
Dressguard,
bulls read this piece and now they pricing in the inflationary impulse incoming: http://www.hussman.net/wmc/wmc090518.htm
How do you like the dax chart? Double-bottom, trendline retest, 4690 held for three days on the hourly… You must be buying!
George, the weekly is driving us, isn’t it? And the monthly stochs turning up will not be sufficient to turn the MACD? 9MA monthly and weekly are very close btw.
Oh Dressguard, I forgot to mention GS issued a buy on European stocks this morning. You know these guys with 90% winning trade days. Now, who exactly is on the other side of their trades?
Yerk,
The way I vew it is the lower time frames drive the higher ones. The weekly is driven by the daily moves and the lower ones drive the daily.
Example, SSO 1min is in an uptrend because the MACD trendlines went above the zero line and price is undulating upward. That has made the 5min stay above its 36MA while undulating around the 9MA and the 15min above its 9MA and 36MA.
This has caused the 30 and 60min stochastic and MACDs to go up. Now, if the 1 and/or 5min start to trend down, they will cause the others to turn over, expecially if the higher time frames are oversold on the stochastic and to a greater degree on the MACD.
BBT could be working its way up to that $22.40 area.
SRS has filled the gap back to $21.58 for those who are into S&M
George,
thank you for the clarification. So the change in momentum is driven upwards. The setting of the higher timeframe should have a strengthening or dampening effect on the lower timeframes. Thinking about it, when the daily is pointing up, moves with hourly down settings should be smaller than those with hourly up settings.
George
I practiced the trade I backtested all weekend with BBT. I thought you had been saying enter on the 9/36 cross of the 15. I waited for that since that is what I tested. Got in when the 5 minute STO pulled back and had a 2/6 MA cross on the 5. 22.09 sold @ 22.30 190 bucks. It makes me feel kinda dirty being in and out like that though. LOL
String
Yerk,
That’s correct and how I view it. I still check to see market direction with the 15min so I do use the conventional method (higher timeframe moving up, buy the lower time frame dips). At the same time, realizing that the lower time frames are in control which will change at any time. Checking two immediate time frames like the 1 and 5min keeps me out of trouble.
Each time frame can be traded standalone, and that its relationship with the MAs and MACD affect the length and strength of the moves.
I’ve been waiting on the SKF 5min stochastic to bottom. Then when the 1min stochastic and MACD began moving up, I bought. I don’t know how far the move will go, but will see if it pushes the 5min stochastic up to 36MA. At this point, locked in .30c profit.
I only got .10c out of the last move it made like this shortly before 11am.
If price goes through the 36MA and MACD histogram goes negative, I sell the last 1/4 at ~.15c profit.
Which 1 minute bar did you enter the SKF trade George?
String
This is a counter-trade on SKF so I don’t expect much. The big profits came with the trend trades so far. The trend is always subject to change on any time frame at any time.
If the SKF 15min stochastic and MACD turn up together, that’s the new trend. Like, price on 15min goes through the 9MA and MACD histogram has a tick above the zero line. Doesn’t mean it will hold because any time frame can be a fake out, but the time frames lower than 15min keeps on the right side of the trade.
Stringm,
12:50
The reason I wait until price goes through the 1min 36MA is because often it uses that as support.
RIght now, the 1min is trending upward so that’s nice.
I could switch to the 5min now and watch its overhead resistance of 36MA.
Could also use Matt’s 7 common breakout patterns to enter more again if it happens. Right now, that could happen on the 1min.
George, you are mentioning Matt’s 7 breakout patterns again. I must have missed that one. Do you or Matt have a link?
Yerk
Look at Thursday trading 5/14 on the main blog page. The Chart Addict link is what you are after.
String
Indian Sensex trading suspended. Guess why!!!
http://www.marketwatch.com/m/story/16006cb2-b8e4-45a8-9614-7970d2c62de9/0
Change Indians believe in
Thanks Stringm!
Whew, what action.
I sold the last 1/4 SKF when price crossed 36MA and MACD went negative. Gain of .25c.
Busy day all this buying and selling. ICE, BBT, UYG, URE, SSO, Mercy!
Is something BIG about to happen? I like the volatility that hangs on for a few bars…
Dressguard,
Short covering… nice. But wait, the Fed doesn’t like shorts, right?
Volatility George? dax is trading within a 20pt range for almost 3 hours now. It gained 200pts before – that was volatile
Yerk,
We can only hope our makets get affected with the “V”irus.
Hate it or love it:
http://www.youtube.com/watch?v=oGIQSlZDUsA&feature=related
MKB,
Luv it.
Bottoms on some of the inverse and BBT reaching the $22.40 I mentioned.
Expecting some kind of a reaction, don’t know how much though.
in this a.m. on dxd 49.80 will add @ 48.78 if it gets there. gulp.
after:
That’s costly and I know you don’t take it lightly.
KOBE should be a stock symbol.
Like Mike and NKE? Kobe lost some private $ over the CO problem but then came out and dropped 81 and a buncha 50′s and the NBA benefitted instead of his then sponsors. E. Spitzer shanked a willing participant and is out a career. I’m teaching my boys to dribble!
Or play golf.
No bombastic close today? Would be nice.
George:
Fair enough.
after…..here comes your fill @ 48.78
waiting for new dow high to sell all ddm bot @ open this am
sold all ddm @ 29.08
Anyone fed up of SRS?
today the backtest of the 20ma has been successful on spx and dax. Melt-up nervousness spreading … bears getting nervous
phil,
WTG
george…thanks…..remember friday i thought the correction was over but i didnt have the guts to buy friday so i paid up this am….
Phil, thanks, but it (DXD) keeps dribbling down -ng-
after…..i am looking for new highs in the dow
Dressguard,
Use URE for the mirror play.
after…..wow we are less than 100 points away…i just saw that…
@George: Was using URE last week.
DXD – well, stuck for now, have an order to sell @ 49.40
SRS – waiting, waiting, waiting for 18.91 – even then might not go for it and even if i do, might sell calls on any purchase.
good luck to us all…
Dressguard,
Got ya… I just flip between the two also.
After another frustrating day of rising markets founded on either no fundamentals or statistically insignificant rises in economic data, I am beginning to conclude that something else is at play. That something, I think, is large scale Federal Reserve liquidity injections through various channels to lay a protective layer of foam on the runway to the GM bankruptcy filing and consequences. Recall that the Fed did a similar thing in the months before Y2K to financially protect institutions against the unpredictable effects of Y2K; happily, Y2K was a none-event, and the Fed withdrew that liquidity afterwards. The Fed Y2K injections pale in comparison to today’s injections, as charts of money supply over time demonstrate. This is quite frustrating as it alters the natural course of market clearing.
Ray:
I would be perpetually frustrated if I thought that “market clearing” is “natural.” Money is a synthetic and is withheld, poured, sloshed, spread, & soaked up quite unnaturally.
A cascade can be natural but terribly frustrating if you want a reservoir instead of a waterfall.
BTW, how does your paragrah flush so nicely?
S&P up 3% and the futures still more or less neutral? Ummh…
Very bullish.
well you got your green monday a week late dressguard and it musta thrown my signals out the window! lol. i’ll check later. Damn goldman leave my strategy alone!!!!!!
if you take a look at this post on May 13th where I just made a prediction about the S&P
“personally i think we will rebound to 910 then crash to 850 bounce to 880 then crash to 750’s LOL”
and on the same day on the BS Pattern I also said
“K Says:
May 13th, 2009 at 8:39 am
looking for 878 as minor short term support:”
WOW I must have been on a roll that day. 878 came true and 910 so far as well. let’s see if 850 follows or if my call accuracy will stop there
Futures turned green. Unbelievable. You have to love recessions.
The money the Fed is pouring into the economy (read: given to financial institiutions) will find its way to the markets and not the general public. The markets are less risk than the public at this point.
This will continue until that money gets flushed out of the system. That could take a lot of time if they stopped right now. But they are not going to stop because that would cause interest rates to go up and that would be counter-productive to their goal. Lower rates = more lending and borrowing.
Here comes another bubble.
well written, George… dax bubbling up to 4940 but should be topping here
I hear that topping theory quite often the last days.
DAX up 5% in two days?! Now at 4970! Not bad. Should have bought that crap. Futures up more than half percent. You have to love recessions.