Weekend Discussion

Dressguard 1, ThinkAI 0

Here’s me reporting that ThinkAI was predicting an uneventful close on Friday. Here’s Dressguard taking the other side. So, score one for the man with the green teeth.

From what I’ve read, ThinkAI keeps a database of stock-chart data, and as the day progresses it keeps searching the DB for charts that match-up best with the current day’s. Then it assumes that the rest of the day will look similar. So, it can’t actually predict the future, but only try to catch the puny humans blindly repeating history.

The approach sounds unsophisticated, but when you consider that most stocks are traded by the same group of traders, it might be just the right approach. For example, George is there trading BBT every day using the same methods. He’s a big part of why BBT behaves the way it does. And that is supposedly true for many stocks: each has its own dedicated group of traders.

ThinkAI got the close totally wrong today, but during the day, it made excellent calls and helped me scalp a few bucks out of the chop.

76 Responses to “Weekend Discussion”

  1. K says:

    Since this is the weekend discussion… :P i’ll advertise it once more… (sorry matt)

    Click on my name above it’ll lead you to the site and click latest picks tab.

    I added a few too many symbols just for this weekend and next week will find a better way to display. I have removed prices to make it easier for me to update and also you wouldn’t get in at the exact price anyways.

    enjoy. I hate myself on the GLD move go check the date got buy signal may 4th and didn’t see it. thank god i found a better way to do things in ameritrade (clickable watchlist instead of dumb alerts lol)

  2. George says:

    I’m not an H&S expert, but SPX 60min could be a failed one. Anyone else?

    SPX is still 10 points away from the double top. A little more to go.

  3. admin says:

    K,

    No problem. Tough break on GLD!

    Matt

  4. admin says:

    George,

    It looks more like a giant pennant to me, which is essentially the same thing as a flag. If that is the right interpretation, then the SPX could easily hit 1,000. Like Larry has been saying, stock prices are inflating just like commodity prices.

    Matt

  5. K says:

    Matt,
    How do you do taxes on TOS? I just realized they are cheaper and easier to use but unlike my former brokers they lack Gainskeeper. Unless TOS has its own import to turbotax feature.. hmm

  6. K says:

    sorry NVM

    In order to gather your thinkorswim trading activity you need to connect to our clearing firm’s OFX server. Look for “Penson Financial” among the list of brokers and clearing firms in your preferred software. If you do not see Penson among the list of brokers and clearing firms you will likely need to download your trade acitivity – using the Penson Resources page on our website – and import it into your preferred software.

    Google Rocks… btw can;t wait for google Wave :P

  7. admin says:

    George,

    TradeStation’s docs say that their RSI is Wilder’s RSI. I’ll make a chart so you can take a look at it. How many periods do you use on a 1-minute chart? The default is 14, with oversold set to 30, and overbought set to 70. Also, how do you plot it? Line? Histogram?

    Matt

  8. BobD says:

    My sp futures chart shows a high of 925 closing the gap down from Sunday May 8. That’s the second gap down to close at this level and a retest of the high volume unsuccessful close on May 20. The first being the Gap Down of Doom from Jan. 7

  9. George says:

    Matt,

    The way I used Wilder’s was a period of 2. I used a line, no histogram. It can be used on any time frame the best I remember. I don’t remember what the bottom vaue was, maybe the 30 or 20. When it spiked down, sometimes to the bottom, and the stochastic was bottomed near the 20 line, that’s a buy signal. I never used it for a sell.

  10. BobD says:

    SPY also closed the gap down of doom from Jan. 7
    http://tinyurl.com/nwu97f

  11. BobD says:

    I could have a bad high print on my spy chart since it uses yahoo data.

  12. Mitch says:

    George:

    I was speculating and being contrary in those commodity stocks I mentioned. Like Larry, I like Nat Gas. The whole of Eastern Europe is working on massive pipeline infrastructure. As oil keeps going up Nat. Gas gets more interesting as well as liquid nat. gas. Deflationists don’t think oil can keep rallying but shorts have been squeezed betting against oil.

  13. Yerk says:

    Mitch, even those betting against CEE countries have been burnt with their CDS shorts. Valuations are bit optimistic all over the place. Visteon bonds went up in value the months before the filing…

  14. Yerk says:

    Matt, so far I stick with what I said a week ago

  15. George says:

    Mtch,

    And then there’s this bit of “alternative” news that’s helping drive natural gas prices:

    http://tinyurl.com/detfsf

  16. George says:

    I just had my car inspected.

    The new state government scalp (now you know how I learned how to do that) is to eliminate the windshield stickers. This is done by FINALLY coordinating the inspection with the yearly registration which eliminates keeping up with two separate events.

    The benefit to the state is increased revenue for the 8% or so of folks who don’t get their cars inspected and not having to produce the stickers. Up to this point inspections have never been tracked – merely a friendly $50 ticket if you’re caught with an expired sticker (and if you only get caught once every two years, you’re saving money). With the new tie-in, cars will be required to have an inspection before they can be registered.

    And… I’m so proud of the elimination of the windshield view-blocking inspection sticker, its associated “Inspection Sticker” charge and I’ll only have to pay for the inspection. WRONG! On the inspection receipt, there was the same $6.25, but for the “E”-Inspection Sticker – STUCK it to us again.

    Creative taxing at its finest. You can’t make this stuff up.

  17. Larry says:

    Yerk, your target of EUR/USD 1.43 looks good. It came quick and as Matt says: it hardly moved the SPX.

  18. Yerk says:

    re Friday’s close:
    http://market-ticker.denninger.net/archives/1072-What-Was-THAT-Friday-Market-Close.html
    http://zerohedge.blogspot.com/2009/05/goldman-sachs-principal-transactions_29.html#comment-10283345

    If we break out of the range I suspect it to be to the upside and without significant retracement before. Targets ~990 or ~1040 before end of July. A top later in the year does not make sense as the squeeze can’t be interrupted and green weeds don’t live that long.

    Else we stay stuck but I don’t see a crash happening in Q2. This would require an end to the reflation trade.

  19. George says:

    Speaking of taxes…

    I suppose our breath will be taxed at some point since we emit carbon dioxide. I know, it’s only for industry… blah, blah… Sure, it starts that way then look how it ends up. China is beating the carbon drum, too! What? They could care less about pollution from their billions+ population. Those capitalist only care about making a buck.

    At first blush, it is a perfect scheme: charge taxes for pollution, reinvest those taxes to help subsidize environmental programs or be issued as a rebate, then lower those taxes as less polution is generated. Guess what? Not going to happen unless there is accountablity and the public holds governments’ feet to the fire. (Hopefully, with Obama there will be better transparency. I’m worried about administrations after him.)

    Here’s what will really happen: Carbon taxes will be used to fund Social Security, wars, pork, new bridges going nowhere, new entitlements, etc. Then, as pollution lowers, that revenue stream drops off and since those “expected” funds are already committed, the tax rate will be raised, new standards and levels will be set, and other forms of environmental taxes imposed (after all, the first ones worked so well). Oh, and did I mention these taxes will NEVER go away – even in K’s lifetime.

    For the monies that actually finds its way to main street, it will help the economy. There will be investment opportunities. This should also be a business-based solution. Look at this 2005 article of BP’s effort to eliminate carbon. The trick is finding a way to benefit (profit) from waste:

    http://tiny.cc/MCr98

    Water and air are the two most important life-sustaining elements. We can’t afford to muck them up. But we also can’t afford to over-do it either. There needs to be a balance.

    I love being this old because I’ve always wanted to be a curmudgeon. :)

    No beans for me tonight, can’t afford the tax.

  20. George says:

    Yerk,

    Nice post and links. It’s good to hear the “whys” about market action.

  21. Yerk says:

    George, thanks. Do you still get new plates each year? That was a very impressive bureacratic event.

    Germany hiked gas tax to pay for social security some years ago. As you say: Tax went up and benefits went down. It is so annoying. My dad is saying you need a war every 40 years or so to reset the system…

  22. George says:

    Yerk,

    Yes, each year new stickers for the plate. New metal plate every 7 years.

    I don’t have a problem with taxes. I like nice roads, we need police and fire services and we must help those that cannot help themseves. My problem is that most governments over-tax simply because they can so they put a tax on everything. There is always, and I mean always, some new bill to spend more funds at the state capital every week. They work for the citizens and they should be finding ways to run the government more efficiently and save tax money instead of finding ways to increase spending.

    They keep coming up with new ways to spend the taxes, then they have to rely upon too high of a level of revenue to maintain their standard of spending. It should be the other way around: They should only be spending what is necessary, and return any excess taxes or reduce taxes if there is an excess.

    No, being conservative and living within their means can’t be done. New programs are started, departments are beefed up and salaries plus benefits rival the private sector beyond belief.

    Our local city government built a gym (sorry, to be politically correct, it’s a “fitness center”) that is awesome. It’s subscription-based, like $50 per month – automatic draft required. That’s a good idea if that produces income in order to relieve the tax burden. However, that’s additional income to current taxes. Then there’s the state lottery – another “additional” cash cow. It never ends.

    If their gym doesn’t produce the revenue needed to run it, they will need to come up with additional funding. There is a risk to the government taking responsibility of a business. Did I mention the result of this action put several local gyms out of business? How’s that for reducing revenue.

    Give me three months and I’ll clean up the mess they’ve created.

  23. Larry says:

    Yerk, there is nowhere to hide. The Keynesians need their Grand Experiment to go on. It’s been 35 years since they last had a real go at it.
    So the Vigilantes, investors and the IB’s must now hide in Commodities.
    But the world is awash in Oil, Gas and Iron Ore?
    Ok, but we have Schiff, Rogers, Faber, 4 billion Asians, Hurricane Season and Nigerian boat bandits.
    How about Peak Sugar?
    This list should keep the media busy over the summer.

  24. George says:

    Longer-term trading:

    I manage my daughter-in-law’s 401K account. I’m swinging the daily/weekly combo. I’m either 100% in or out of the market with her funds.

    When the daily meets the same criteria as my scalp setups, I enter. Now that the daily is above the 36MA, I will wait to exit when it crosses the 9MA.

    The weekly bounced off its 9 and 36MA where they have ever-so-slightly crossed. If price moves above the 36MA on the weekly, I will use it to exit should price close back down through the weekly 36MA. This is also the point where crosses can fail.

    Ah, nice to trade when it only takes a chart glance a couple of times per day.

  25. George says:

    Larry,

    I well remember the sugar crisis 35-or-so years ago. We called sugar a “bag of gold” it was so expensive. I used honey for sweetner. Then, there was a glut in the market several years later and they were giving it away.

    I do luv cycles.

  26. Yerk says:

    George, the Bundestag yesterday passed a law limiting the federal budget deficit from 2020 on to .35% of gdp and restricts the states to 0%. So the states will rip off the counties to survive and the federal govt in 2020 (how far away is that?) will give a damn. Saddening.

    Larry, you are spot on. During the summer we’ll see the peak of everything pushed under the carpet.

  27. after says:

    Larry, if there is nowhere to hide, do you have any positions at all here ?
    I have very mixed feelings here, figuring we’ve run up a lot in a lot of things, Cdn $ up a lot in June, now people have noticed it. Best when people don’t notice things -g- So I’m worried about commodities continuing and maybe we get a surprise on the downside. Equities, I’m kind of on the fence but holding some DXD with June 49 calls sold. Avg cost on DXD is north of 49.

  28. admin says:

    In the Denninger post that Yerk linked to back here, Denninger mentioned the “pit audio feed”. Does anybody know how to get that? I always thought that pit trading was accomplished with frantic hand-waving and shouting. But if they have a feed you can listen in on, that would be very cool.

  29. Yerk says:

    Matt, I think it is this one: http://www.tradersaudio.com

  30. admin says:

    Thanks Yerk! I’m going to sign up for the free trial.

  31. admin says:

    George,

    Here is a BBT 1-minute chart from Friday afternoon with TradeStation’s RSI:

    http://www.trivisonno.com/TS-RSI.jpg

    I put a white, dotted, vertical line through 15:27pm where the RSI bottomed out and gave a buy signal two minutes before the stoch crossed up. Is that what you are after?

    My charts always look fuzzy. If anybody can tell me how to make them sharper, I’m all ears. Maybe JPEG isn’t the best format for this type of image?

  32. George says:

    DOW in horizontal channel. Hopefully, two copies of the same chart doesn’t mess up one or the other:

    http://www.freestockcharts.com?emailChartID=df8e435e-e038-42c2-a08c-eb78e459f4f8

    SSO horizontal channel:

    http://www.freestockcharts.com?emailChartID=b2018304-5613-473b-8a40-2531b81ab347

    DOW SELL SIGNAL

    I know… price went up after the signal. I see it all the time intraday. And if it continues up with the entry signals saying OK, then it can be entered again.

    http://www.freestockcharts.com?emailChartID=afdc25e5-bfdf-45f5-a6d5-056f449722cf

  33. George says:

    Matt,

    That looks very much like I was using it. Try it on a downtrend or ranging and see what happens.

    During an uptrend, there will be fewer of these bottoming out, which is correct, because the stochastic cycles relative to volatility and range.

    Nice.

  34. Larry says:

    After, yes I am heavily positioned.

    My point is: If Gov’t debt, corp debt or cash is no longer a place to hide, where is?

    The answer is: There is no place to hide.

    Which leads to the next step: There are places to hide, but those places are so small (Gold, Silver, Oil, Gas, Agro, Metals) that a run for these hills is too much to handle for mankind right now.

    So we must pray that The Central Planning Committee get this thing right and that I lose my shirt. One way would be to cool down the money flow, let stock market correct where real buyers and sellers meet and let bad credit collapse.

    Then we could get on to the path of recovery.

    Now, sit down and read General Theory by Keynes. It is incomprehensible. But this is policy now. Make it up as you go along, just make sure you throw money every day into the Output Gap.

    As for Asia, things are not as bad as in the West. But money supply (M2) is up 26% YoY in China.

  35. admin says:

    George,

    Do Strategy Desk and StockCharts give you a different RSI plot than the one on my chart?

    Matt

  36. George says:

    Larry,

    We need to send you to Washington. For real.

  37. George says:

    Matt,

    I’ll check.

  38. George says:

    Matt,

    Both StockCharts and SD are the same as you posted. Is yours the Wilder’s?.

    Note how this is great for an entry into a stock that is already in an uptrend.

  39. K says:

    George, ThinkorSwim has the Wilder’s RSI

    RSIWILDER and RSIWILDERLEGACY but they seem to be exactly alike

    http://i41.tinypic.com/2i7pnap.png

    picture is a little large but bear with me

  40. admin says:

    George,

    According to Wikipedia:

    http://en.wikipedia.org/wiki/Relative_strength_index

    …there are two kinds of RSI’s. Wilder’s which uses EMA’s in its formula, and Cutler’s variation which uses SMA’s. TradeStation’s docs say that their RSI is Wilder’s RSI. TOS has an indicator named “RSI Wilder” and it matches with TradeStation’s RSI.

    Yes, this does indeed look like an excellent indicator for quickly spotting pullback entry points in an uptrend.

    Matt

  41. admin says:

    K,

    TOS doesn’t let you look at the code for the legacy version, so I’m thinking that that is an older version of the RSIWilder written in some other language and held over for backward compatibility reasons.

    Matt

  42. George says:

    Great, then I’ll start using it. Since I don’t have the two side-by-side, I made that assumption that they were vastly different.

    Thanks folks!

  43. K says:

    remind me again how this is a great indicator and if it works on all timeframes? :) must have missed your explanation george.

  44. K says:

    WOW look at DDRX from April to now !! used the RSI in daily and i see what you mean now about pullback entry points on uptrend. now what about downtrend or sideways? :P

  45. George says:

    K,

    It is another tool to find bottoms. I have used it in the past when it bottoms at the same time (or nearly) stochastic bottoms, as a buy signal. Often, both will bottom out and stochastic will make a double bottom “UU” shape then turn back up. RSI2 will give a signal first by going below the 20 line then move up a couple of notches with higher spike-lows while the stochastic catches up.

    You can see that the frequency it punches below the 20 line is often and coupled with the stochastic, it is a good warning indicator that a bottom is in. Note that it tracks each up and down candle then moves progressively higher or lower realtive to the price candles moving up or down.

    To put it another way, it is quicker than the stochastic and serves as a warning that the bottom of this cycle is imminent. I used it on the daily chart for swings and intraday for scalps. Another aid with entries.

    Hope it helps.

  46. George says:

    K,

    Sideways, uptrends, GREAT. Downtrends, not so great. And, I don’t short, so I’ve never used the top spikes.

    Due to the quickness of the indicator, it will give counters okay, but like all counter-trend trades, the moves could be very small.

  47. K says:

    If you doubled one penny every day for 30 days, you would have $5,368,709.

    now that’s what I call scalping LOL

  48. Stringm says:

    Matt, George, Julie et al

    I feel relatively stupid! I guess in a way that is good, because my guess is ,everyone picked up on it, and felt sorry for me. The pearls everyone have thrown to me have been unmeasurable. The transition from Telecom Guru, to stock trader has been extremely difficult for me. I owe a debt of gratitude to everyone here.

    I took a course in trading, only $500, which is cheap compared to the 5-10K advertised. It was a 30 plus audio CDs with a manual. The instructor described his trading method, and stated just DO what he said and don’t analyze it, and you would make money. It was an eye opener, and I tried to follow it to the T. Now I understand the method works, but not for me. I can’t follow it. I can’t blindly follow a method without understanding how it works. This board has given me a new perspective. Now I understand what I was given in the course, and much more.

    I have enough capital that if I could make 10% a year, it would be like Christmas every day around here. With the wisdom and info being provided here I know that goal is attainable.

    I pulled up charts last night with nothing but 3/9/36 MA, no indicators at all. All I did was look at how the MA were lined up on the daily, and which ones were declining and which ones were going up. I think I finally have a grasp.

    You Gals/Guys are the Geatest!!!!

    String

  49. K says:

    String,
    Here I am barely legal to drink with limited capital and they still were helpful.

    I suggest you check out Steve Nison’s recorded seminar. It was given to me as a gift but am sure it can be bought online or even illegaly downloaded.

    I know i shouldn;t promote illegal activity i just threw it out there
    This is only if you are interested in learning more about candlesticks.

    http://www.candlecharts.com/

    Other than that keep it up :)

  50. K says:

    Profiting with Japanese Candlestick Charts is the one i have
    http://www.candlecharts.com/dvds/index.html

    watch the first sample video there. I’ll be looking at the 2nd seminar but first was most useful from what I heard

  51. K says:

    ok stop with me talking but there is a new dvd somewhere that he doesn;t use slide projectors. and yeah just do some googling :) he even has books but i like videos better

  52. Larry says:

    George, maybe people get so depressed during a Keynesian stagflationary cycle that they need more sugar?

    There is a sugar ETF in London but it is new and almost no trading.

    DBA is 25% each of sugar, soybeans, wheat and corn. DAG is the double-long.

    If I do ‘The George thing’ on DAG on a monthly basis it looks quite solid.

    Until it all collapse again.

  53. George says:

    Stringm,

    That’s not stupid at all!

    It’s called the “learning curve” and part of that process is finding “your” trading method that gives you the comfort and confidence to follow the indicators you like without question: Robot style.

    All of us are different, naturally, and we’ll not all use the same method: One person’s trash is another’s treasure… and all of that. Our laying out ideas, methods, hints, and all of that is similar to a menu to select from. Once we find what we like, we run with it and keep improving it – our own way.

    To some, using the RSI as I do must seem crazy. Not to me though. On the other hand, I know almost zero about Elliot Wave (EW) but I don’t for a minute think EW’ers are crazy. The fact is, it is amazingly accurate.

    I’m like you: If I don’t get a gut-feeling for something, if I don’t completely understand it, I won’t fully grasp it in a manner that allows me to have total control. Total control is knowing a process well enough to know what to do, when to do it, and under varying conditions.

    Trading is deceptively simple. That old 20/20 hindsight thing bites us every time. Most don’t know what will happen when a trade is entered – I certainly don’t. But I know that if I do what my method says, I have a great chance of coming out on top.

    “Even the simplest trading method will be successful if followed faithfully.” (Author unknown).

  54. George says:

    Larry,

    DBA looks real good. DAG has a wild 1min that I wouldn’t touch. Also, I can’t get any MACD and stochastic on the higher time frames with both StockCharts (SC) and StrategyDesk (SD) on DAG.

    Coffee got into the same situation as sugar many years ago. I refused to drink it and went to tea.

    I bet the world goes through a small mountain of coffee beans each day. That ain’t going to stop anytime soon.

    Thanks for the DBA and DAG tip.

  55. George says:

    EOM Tape Painting. David Fry of Seeking Alpha:

    http://tinyurl.com/nx5o7p

  56. admin says:

    Instead of reporting the Chicago PMI, CNBC prefers to broadcast inane chatter about Mark Haines’s ass, “The Haines Bottom.” Nevertheless, the PMI knocked the SPX down almost 10 points on Friday morning. It looks like the second dip of a double-dip recession may have begun in Chicago. The outfit that publishes the report is here:

    http://www.kingbiz.com/library.asp

    Not only is the PMI back below where it was in December, but if you look at Friday’s release, you will see in the employment section a plunge and the comment “2nd lowest rate since 1946.”

    And indeed, there is still no sign of life in the jobs data. Friday’s jobs report will again show huge losses and a 9-handle on the unemployment rate. See the Bloomberg report here.

  57. admin says:

    QQQQ MACD has crossed-up on the daily chart. The last cross-up was on April 27th.

  58. George says:

    Ooops, I made a boo-boo. – CORRECTION -

    On the post with the DOW, I said that was a sell signal.

    INCORRECT!.

    http://www.freestockcharts.com/?emailChartID=afdc25e5-bfdf-45f5-a6d5-056f449722cf

    Price went above the daily 36MA so it won’t be a sell signal until price closes below its 36MA and MACD histogram is below the zero line. There was a sell signal on the 60min, but then it started cycle-whipsawing on that time frame.

    Apologies to all. I’m trying to do too much stuff.

  59. K says:

    i wrote a long post then i accidentally refreshed. anyways.. Good luck trading tomorrow. I start work to make more capital :P I hope my manager won’t mind me trading 1hr a workday lol

  60. Dressguard says:

    Futures are exploding. :-(

  61. Charlie says:

    I can see that Dressguard. I guess everyone is happy that GM is going bankrupt.

  62. Dressguard says:

    They love the Chinese “recovery”. So the U.S. can sell more products overseas. Uhmm…what products? :mrgreen:

  63. Dressguard says:

    DAX moonshooting. That’s gonna hurt today. :-(

    http://www1.deutsche-boerse.com/parkett/DAX_chart_realtime.jpg

  64. Charlie says:

    Sure seems like there will be loads of pain for shorts today. Futures already point to a violation of the double top established earlier and the fact that global markets are rocketing higher is not good.

    JG.. looks like pain is in the books for us holders of SRS tomorrow morning. Grrr…..

  65. Dressguard says:

    DAX shows a Gibbs pattern:

    http://en.wikipedia.org/wiki/Gibbs_phenomenon

  66. Dressguard says:

    Gibbs keeps on ringing but DAX doesn’t make a blip.

  67. Yerk says:

    DG 5111.02 is January’s high. So we are close (less than 1pt away).

    Gibbs pattern days are nasty… They jump the market 1% within seconds and nail it again. Public holiday, so not much volume.

  68. K says:

    just when i was wondering when we would hit 941 I wake up to 937 futures. WOW

  69. Julie says:

    Investment bankers will make a small
    fortune as they guide GM thru the
    bankruptcy process.

  70. Julie says:

    We do not make trade recommendations. But
    if the S&P 500 futures move into the 940 to
    950 area, resistance should increase and
    we are taking a serious look at taking our
    long profits and shorting the market with
    a 15 point stop.

  71. Julie says:

    “Money and Markets” projects the U.S.
    debt to reach 97% of GDP in 2010.

  72. Yerk says:

    Julie, many thanks for sharing your view. A trailing stop might be another possibility – in case the forces at work are not satisfied yet. Not a recommendation either ;-)

  73. Julie says:

    Yerk & Larry,
    My Grandfather wants us to pump our
    profits into gold. He says the green shoots
    are really green weeds. And when the bailout
    bubble bursts, it will make 1929/1930′s look
    like a growth period.
    Please google…trendsresearch.com…click
    on forecasts, and let me3 know what you
    think. Thanks.

  74. Julie says:

    Yerk,
    It is always dangerous to try and project
    a temp. top. But if the S&P 500 futures
    move into the 940 to 950 area, we will
    be happy with our profits…and if our
    short turns out to be a mistake, we
    will hedge it with futures options. Thanks
    for your input…keep them coming.