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ES and the Great POMO Rally


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ES and the Great POMO Rally

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  #701 (permalink)
 tigertrader 
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redratsal View Post
Who is going to be trapped ? Bears keep in mind that RTH boys have several gaps to be filled from the upside. I think the games will start in the last hour of RTH. I also think bad news are coordinated, after yesterday's rally it is a good timing to take all the skeletons from the closet and clear pessism's away, that is also why Bernanke didn't start the Qe3 campaign, there is always time if things get worst.


Yesterday's post FOMC announcement reversal- and - rally was textbook action, albeit an extraordinarily large trading range. So, it appears the market has been discounting the move.

One would naturally think that today would be an inside consolidation day, and not a spike up follow through day, because of yesterday's large range and volatility.

Bonds, gold and the dollar, indicate that investors are gun-shy, and are not ready to test risk so soon, but if the market is to "bounce" at the very least, it needs to hold the previously mentioned levels and stage a modest rally at the minimum.

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  #702 (permalink)
 tigertrader 
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taking partial profits @1159.00 -1160.00 if it gets there...

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  #703 (permalink)
 tigertrader 
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Meow....

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  #704 (permalink)
 Jeff Castille 
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tigertrader View Post
Meow....

Is that the sound a tiger makes?

Does this mean you didn't reverse when you heard that big flushing sound?

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  #705 (permalink)
 Private Banker 
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Another wild day for the markets. Nice sell off overnight and into the RTH open. Market then got choppy and it seemed like someone was absorbing all the orders around the 1121 - 1123 area. Market got a bounce and ran right into the 61.8% level from the overnight high where it was met with a fresh round of selling and may have squeezed out whoever was buying this up in the morning.

It now seems that every attempt to move higher is met with fierce selling. We still haven't approached yesterday's low but I wouldn't be surprised if we give that area another test.

The banks are getting absolutely beat up here. BAC, C, MS and the Vampire Squid all getting crushed today. Get ready for a liquidity crisis again. Money market funds have been transitioning out of Euro bank paper which will cause a huge liquidity disruption in Europe. This can easily make it's way over to the US.

Stay nimble!

PB

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  #706 (permalink)
 tigertrader 
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Jeff Castille View Post
Is that the sound a tiger makes?

Does this mean you didn't reverse when you heard that big flushing sound?

That's the market - not me!

I'm always growling!

I stopped myself out (@1151.75-1150.00) after the market made consecutive lower highs

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 Jeff Castille 
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tigertrader View Post
That's the market - not me!

I'm always growling!

I stopped myself out (@1151.75-1150.00) after the market made consecutive lower highs

I was hoping that was the case!

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 Lornz 
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Private Banker View Post
Another wild day for the markets. Nice sell off overnight and into the RTH open. Market then got choppy and it seemed like someone was absorbing all the orders around the 1121 - 1123 area. Market got a bounce and ran right into the 61.8% level from the overnight high where it was met with a fresh round of selling and may have squeezed out whoever was buying this up in the morning.

It now seems that every attempt to move higher is met with fierce selling. We still haven't approached yesterday's low but I wouldn't be surprised if we give that area another test.

The banks are getting absolutely beat up here. BAC, C, MS and the Vampire Squid all getting crushed today. Get ready for a liquidity crisis again. Money market funds have been transitioning out of Euro bank paper which will cause a huge liquidity disruption in Europe. This can easily make it's way over to the US.

Stay nimble!

PB

You're making me complacent! I don't even need to open my own charts, I know I can just wait for your post at the end of the day.... Thanks for your contributions!

I had a dentist appointment today, and did not get back in time. It's depressing to see what I missed... I barely caught the last wave down, though. But I should have just pulled the tooth myself and been ready from the get-go...

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  #709 (permalink)
 Lornz 
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Michael.H View Post
Lornz, if you don't mind me asking, how old are you? you don't have to give me a specific age, you can say 20's or 30's...
I have a few close friends in Oslo... Are you in banking as well, or is this a hobby?

Really? Americans or Norwegians? Traders?

I am in my late 20s, and trade my own account full-time. I've been trading (in various forms) for 8 years. I also just embarked on a BSc in Mathematical Finance; I have been toying with the idea of doing something more with my trading...

Feel free to send me a PM!

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 Private Banker 
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Lornz View Post
You're making me complacent! I don't even need to open my own charts, I know I can just wait for your post at the end of the day.... Thanks for your contributions!

I had a dentist appointment today, and did not get back in time. It's depressing to see what I missed... I barely caught the last wave down, though. But I should have just pulled the tooth myself and been ready from the get-go...

Yikes! Tooth pulled? Hope everything went well! Yeah, today was another wild day. I expect to see this for a while.

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  #711 (permalink)
 Lornz 
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Private Banker View Post
Yikes! Tooth pulled? Hope everything went well! Yeah, today was another wild day. I expect to see this for a while.

Just to clarify (in case my future wife reads this): my teeth are not rotten or falling out... I've had some trouble with a wisdom tooth which in turn gave me a nice root canal infection in the tooth next to it.

Oh, the joy of going to the dentist and missing out on several hundred ticks...

I suggest you guys chip in to cover my lost opportunities?

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  #712 (permalink)
 Big Mike 
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Lornz View Post
I suggest you guys chip in to cover my lost opportunities?

I think your still high from your dental procedure...



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  #713 (permalink)
 Lornz 
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Big Mike View Post
I think your still high from your dental procedure...



Mike

Is that a "no"?

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  #714 (permalink)
 tigertrader 
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Once again the market experienced a relatively large trading range and high volatility due to the lack of liquidity in the market. Today's action was essentially a mirror image of yesterday's trade, with the market leaving a dead cat's bounce as a lasting impression, although the market failed to make lower lows.

After the cash close, the bonds and dollar sold off, and the yen firmed up. Bullish technical divergences suggest that the market may have gotten a little ahead of itself to the downside, and relative strength in emerging markets, especially Brazil, suggests that the a bounce in equities could begin there. A likely scenario would see the ES retrace it's downside move back to the 1232.00 level where a confluence of resistance awaits (see chart).

No doubt there remains huge uncertainty in the Euro-zone which makes it sensible to remain cautious of the global systemic implications. However, in an attempt to circumvent the possibility of a liquidity trap, Trichet recently pledged commercial banks would be able to access as much liquidity as they needed from the ECB until at least the end of the year, and has backed up his statements through continued bond purchases. This should buy the market enough time to stage a relief rally to the aforementioned level.

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 Private Banker 
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Lornz View Post
Just to clarify (in case my future wife reads this): my teeth are not rotten or falling out... I've had some trouble with a wisdom tooth which in turn gave me a nice root canal infection in the tooth next to it.

Oh, the joy of going to the dentist and missing out on several hundred ticks...

I suggest you guys chip in to cover my lost opportunities?

Lol! You got it! I'll buy you a round the next time I'm in Norway!

Cheers,
PB

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  #716 (permalink)
 tigertrader 
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HFT

Helluva-lot-of-Fun-to-Trade !

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  #717 (permalink)
 ron99 
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Lornz View Post
Like I said earlier in this thread, I have am just waiting for my 950 puts to go itm. Then I shall retire!

Can I ask what at what price you put these on at? Do you still have them?

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  #718 (permalink)
 ron99 
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So are the ES day traders making money this week or are they getting chopped up?

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  #719 (permalink)
 tigertrader 
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Getting short for the first time today@1159.25, for a quick contra-trend trade, w /tight mental stop, however.

1154.00 cover and flip...

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  #720 (permalink)
 tigertrader 
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Could see 1195.00...today!

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 trendisyourfriend 
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tigertrader View Post
Could see 1195.00...today!

I have these levels on my radar...


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 Private Banker 
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Wow! Yet another crazy day! What in the world happened here?!!! Lol! Well, one thing I'm very happy about is my decision to just continue to intra-day trade this chaos. I mean, I believe we had an 81 point swing today. This is really getting to be crazy (but good).

Market opened down (again) and drifted higher while being somewhat choppy. And then just like two days ago, we get this flurry of buying/short covering into the afternoon close. It was absolutely amazing. Then right before the close, we get roughly a 20 point drop. Gone are the days of an 8 point range day, lol! Once again, price closed at or below the 1171 area which was a swing low back in November of last year. What's next?! Lol!

BofA is still looking interesting as it's stuck on Bear Island.

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  #723 (permalink)
 tigertrader 
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As I remarked 2 days ago, the US “economy” is still in decent shape as private payrolls continue to gain, and corporate profits continue to rise as a result of increased productivity due to lower labor costs. So, it was no surprise that the bulls came out in force today, capitalizing on a very "convenient" drop in jobless claims and record earnings from Cisco, and ramped up stocks and just about everything else in sight.

As alluded to last night, the Bovespa surged 3.8% today, as emerging shares showed good relative strength. Treasuries and gold were big losers on the day, as capital temporarily flowed back into risk assets, while the Swiss franc was the biggest loser as the Swiss allowed the franc to be temporarily pegged to the euro.

The market made a strong statement today, in an effort to re-confirm and validate the post FOMC rally it showed us the other day, and is now within easy reach of of the 1232.00 area, which represents a 50% retracement of the down move, monthly S2, and 20 EMA. The 1264.00 area represents a 61.80% retracement, monthly S1, 200EMA, and the level we sold off from the night the BOJ bought dollars.

Given the damage done to the market and the extensive work that would have to be done overhead, it seems unlikely that the market could exceed these levels on a bounce. Accordingly, it would take considerably more work, for the market to penetrate these levels. IMO, a failure from these levels and subsequent new lows, is the more likely scenario.

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 jonc 
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"A 15-day short selling ban, which will be implemented on Friday morning across several European countries, has attracted opprobrium from market participants, who see the restrictions as a superficial move that will do little to solve the underlying problems of the euro zone and stop market turbulence.

The majority of the comments from European traders who spoke to CNBC.com on Thursday night were not fit for publication.

Regulators hope that the ban on short-selling in France, Italy, Spain and Belgium will reduce speculative action and curb the aggressive sell-offs that have hit markets over the past week......"


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 Lornz 
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jonc View Post
"A 15-day short selling ban, which will be implemented on Friday morning across several European countries, has attracted opprobrium from market participants, who see the restrictions as a superficial move that will do little to solve the underlying problems of the euro zone and stop market turbulence.

The majority of the comments from European traders who spoke to CNBC.com on Thursday night were not fit for publication.

Regulators hope that the ban on short-selling in France, Italy, Spain and Belgium will reduce speculative action and curb the aggressive sell-offs that have hit markets over the past week......"


Yes, I love this capitalistic system we have, free markets and all. Laissez-faire is firmly establishing its prevalent position...

First they prop up these institutions with countless billions, and on top up that they ban short selling. Sure sounds like a recipe for prosperity. How about doing something about the underlying problems?

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 Lornz 
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ron99 View Post
Can I ask what at what price you put these on at? Do you still have them?

I've had LEAPS on various levels for quite some time, in addition to some shorter term positions. I don't really want to go into detail about all my positions, but I did lighten up my load on the way down. I should have taken more of my oil puts off, though.


ron99 View Post
So are the ES day traders making money this week or are they getting chopped up?

Chopped up? I've never seen more beautiful trends... You even get several a day!

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 redratsal 
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3 days ago, are you ready Captain?:



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 tigertrader 
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redratsal View Post
3 days ago, are you ready Captain?:



I pity the poor fool, that fades you !!!

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 tigertrader 
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I am really going to miss the volatility when the liquidity returns to the market. Eventually, the market will get thick again, and the HFT's and program's effects will be mitigated by the increased liquidity. For all of us dopamine deprived traders with ADDH, these markets have been a godsend. There have have not been any interminable periods of waiting for trades to materialize, just the rapid succession of protracted moves, as the market decisively metes out it's justice.

It won't last forever, so take advantage of it while you can!!!

Attached is weekly VWAP. ( aka, Red's Ouija board)

Could be it to the upside, for the week.

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 Private Banker 
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tigertrader View Post
I am really going to miss the volatility when the liquidity returns to the market. Eventually, the market will get thick again, and the HFT's and program's effects will be mitigated by the increased liquidity. For all of us dopamine deprived traders with ADDH, these markets have been a godsend. There have have not been any interminable periods of waiting for trades to materialize, just the rapid succession of protracted moves, as the market decisively metes out it's justice.

It won't last forever, so take advantage of it while you can!!!

Attached is weekly VWAP. ( aka, Red's Ouija board)

Could be it to the upside, for the week.

Yeah, this has been amazing! And I agree, the bid/ask size has dropped significantly. We're seeing 1,000 - 2,000 bid/ask on average right now vs 7,000+ on average during normal market conditions. Surprisingly, I haven't experienced any slippage during this. Curious to see if anyone else has or not.

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 tigertrader 
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The market appeared to run out of steam today, in spite of broad growth in retail sales, as the ES tested the highs of the weekly trading range and the +2 SD on the weekly VWAP. Yet, the market continued to build value above the high volume area from 1117.00-1147.50 and closed well above the weekly VWAP @1145.00. The yen continued it’s comeback and has all but erased the losses it suffered after the BOJ intervened, while the dollar showed further consolidation. Treasuries closed higher today, but still show the potential of having put in a bottom in yields.

The ES recouped the entire 4.4% loss it suffered Wednesday in large part to bullish employment numbers , good corporate earnings, and growth in retail sales, yet market internals are still weak, high yield credit spreads still continue to widen, (when they should be contracting), and (as PB pointed out) financials are under-performing and are under-weighted

So, while the ES is being accepted at these levels and will probably continue to trade higher, it most likely will still fail, from the levels previously discussed.

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 Michael.H 
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Really? Americans or Norwegians? Traders?

I am in my late 20s, and trade my own account full-time. I've been trading (in various forms) for 8 years. I also just embarked on a BSc in Mathematical Finance; I have been toying with the idea of doing something more with my trading...

Feel free to send me a PM!

They're norwegian.... They work for a investing firm. We still keep in touch, its amazing how tight the regulations are over there. He wanted to send me some ideas for stocks, and later found out that i can't if i have us citizenship.... Very interesting. Guess thats why your economy has been so stable for so long, and we go through shit like this every 8 years.

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 jonc 
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tigertrader View Post
I am really going to miss the volatility when the liquidity returns to the market. Eventually, the market will get thick again, and the HFT's and program's effects will be mitigated by the increased liquidity. For all of us dopamine deprived traders with ADDH, these markets have been a godsend. There have have not been any interminable periods of waiting for trades to materialize, just the rapid succession of protracted moves, as the market decisively metes out it's justice.

It won't last forever, so take advantage of it while you can!!!

Attached is weekly VWAP. ( aka, Red's Ouija board)

Could be it to the upside, for the week.

This is definitely the best week I ever had - in term of profit (I can quit my job if I have the same results every week). I had not been trading for that many years and one of things which I am worried about is that there will come a time when I do not know how to trade the ever changing market anymore.

For you guys who are still trading profitably after decades, you are really great!

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 tigertrader 
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jonc View Post
This is definitely the best week I ever had - in term of profit (I can quit my job if I have the same results every week). I had not been trading for that many years and one of things which I am worried about is that there will come a time when I do not know how to trade the ever changing market anymore.

For you guys who are still trading profitably after decades, you are really great!

Let me be the first to congratulate you on your "personal best" week. We are currently blessed with markets which are perfect for building a trader's confidence, and great for building up their accounts, however they must be kept in perspective.

Markets are cyclical in nature, and there are going to be times when market conditions are extremely favorable for making money, but there will be more times when conditions are less than favorable. The volatility we are experiencing can be thought of as being about +2SD away, which means that eventually, the volatility will revert back to it's mean. Simply stated, the markets won't always be this "good" or this "easy" to trade !

A common trait of successful traders is their ability to "stay the course" emotionally. Do not allow your emotions to fluctuate up and down with your P&L. Instead, always maintain an objective perspective of you progress as a trader.

This means that we should take advantage of the situation while it lasts, continuing to work on our skills as a trader, while keeping in mind that trading will inevitably get more difficult in the future.


“In many ways, large profits are even more insidious than large losses in terms of emotional destabilization. I think it’s important not to be emotionally attached to large profits. I’ve certainly made some of my worst trades after long periods of winning. When you’re on a big winning streak, there’s a temptation to think that you’re doing something special, which will allow you to continue to propel yourself upward. You start to think that you can afford to make shoddy decisions. You can imagine what happens next. As a general rule, losses make you strong and profits make you weak.” – William Eckhardt

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 Private Banker 
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jonc View Post
This is definitely the best week I ever had - in term of profit (I can quit my job if I have the same results every week). I had not been trading for that many years and one of things which I am worried about is that there will come a time when I do not know how to trade the ever changing market anymore.

For you guys who are still trading profitably after decades, you are really great!

I second what Tigertrader said on this and would add that one key element to continually stay at the pace of the market is to constantly evaluate how you're doing vs what the market is providing and looking for ways to enhance your trading. For example, when I started trading, my primary screen for trade management was the 5 minute chart. Over time there has been tick, range and renko bar charts invented. So, I was able to take my method from using a 5 minute as a primary screen and enhance it by using a tick bar chart. And then when range bars came out, I was able to use those to even further enhance what I'm doing (range bars get rid of a lot of the noise that tick bars have). I, of course still look at the 5 minute and a few other bigger picture charts in addition to my range charts but the idea is to be constantly enhancing and/or making your trading more efficient. Also, adjusting interval size with the current volatility and adjusting money management, etc. is key in times like these.

Would my original method still work in these markets? Yes however, I've figured out a way to enhance my results by using new, innovative tools that are available to us. Just like any business, we must always look to enhance and grow with the changing times.

Cheers,
PB

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 Surly 
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I, like jonc, have only been trading a short time - a little more than two years in my case. These markets the last 2 weeks have been seemingly easier to trade - the big moves have made entering easier (because you can make the mistake of entering late and still capture a reasonable move) and the Win sizes more than make up for a few losers (assuming you hold winners).

I'm curious about this question of volatility vs. position size. The question is: are volatile markets actually easier to trade than less volatile markets? If so, what is the reason?

One possible reason is that in volatile markets, the delta between entry and exit in ticks is bigger - the moves are bigger and so there are more ticks available. However, it would seem that if this is the only factor, then the "volatility" in this sense could be artificially reproduced by increasing position size during less volatile markets (thus smaller market moves would generate similar "delta" to large market moves).

The other possible reason is that volatile markets (in the sense of the average size of bars on all timeframes) actually behave differently and more predictably than less volatile markets. In other words, it is not just that the swings are bigger, the market patterns themselves are actually more predictable or repeat with a higher degree of fidelity.

There may be other possible reasons that these volatile markets are "easier to trade" or "easier to make money during" - I'm curious to hear others' opinions about this.

Finally - the interesting (at least to me) conclusion from the two explanations I've offered is that, if you think the reason it is easier to make money during these markets we've had over the last two weeks is reason #2 (that the actual patterns are easier to trade), then it follows that you should be RAISING your position size during these times even though this dramatically skews your risk parameters due to the larger stop sizes (in ticks) necessary. In the book "Pit Bull" Marty Schwartz says this very thing although he does not offer an explanation - he merely states that during volatile markets he feels its important to increase position size; I had never agreed with his statement but I'm starting to think he was right...

(perhaps this should be a new thread but its actually the participants of this thread who's opinions I'm seeking...)

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 tigertrader 
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Surly View Post
I, like jonc, have only been trading a short time - a little more than two years in my case. These markets the last 2 weeks have been seemingly easier to trade - the big moves have made entering easier (because you can make the mistake of entering late and still capture a reasonable move) and the Win sizes more than make up for a few losers (assuming you hold winners).

I'm curious about this question of volatility vs. position size. The question is: are volatile markets actually easier to trade than less volatile markets? If so, what is the reason?

One possible reason is that in volatile markets, the delta between entry and exit in ticks is bigger - the moves are bigger and so there are more ticks available. However, it would seem that if this is the only factor, then the "volatility" in this sense could be artificially reproduced by increasing position size during less volatile markets (thus smaller market moves would generate similar "delta" to large market moves).

The other possible reason is that volatile markets (in the sense of the average size of bars on all timeframes) actually behave differently and more predictably than less volatile markets. In other words, it is not just that the swings are bigger, the market patterns themselves are actually more predictable or repeat with a higher degree of fidelity.

There may be other possible reasons that these volatile markets are "easier to trade" or "easier to make money during" - I'm curious to hear others' opinions about this.

Finally - the interesting (at least to me) conclusion from the two explanations I've offered is that, if you think the reason it is easier to make money during these markets we've had over the last two weeks is reason #2 (that the actual patterns are easier to trade), then it follows that you should be RAISING your position size during these times even though this dramatically skews your risk parameters due to the larger stop sizes (in ticks) necessary. In the book "Pit Bull" Marty Schwartz says this very thing although he does not offer an explanation - he merely states that during volatile markets he feels its important to increase position size; I had never agreed with his statement but I'm starting to think he was right...

(perhaps this should be a new thread but its actually the participants of this thread who's opinions I'm seeking...)



Trading boils down to mathematics and patience. It is about the ability to identify and wait for extremely profitable opportunities, and then take maximum advantage of them. It is one of the guiding forces behind my trading, and why I aggressively add to my winners, whenever the opportunity presents itself.

Current volatility is high because the markets are experiencing record low levels of liquidity. Hence, HFT and program-trading induced moves appear as if they are on "steroids". But, it's not just a matter of volatility, but the size and duration of the moves. The moves are much bigger and much faster than "normal", and this very salient fact, is highly correlated to one's opportunity to make money.

The markets moves are happening quicker and may be recurring with a higher degree of fidelity as result of the volatility. And it’s the technicians that try to attach a logical meaning to these abstract patterns, and the concomitant phenomena of self-fulfilling prophecy, that makes them appear to play out, but it is the bots that are moving this market.

Volatility is up approximately 3X, and in response I've cut my size back 1/3, because I know have to place my stops farther away. It doesn't make sense to start risking 6% on a trade when I normally risk 2%, just because volatility has increased. My size will increase when my account size gets big enough to justify it or volatility decreases, and I can move my stops back in. And believe me, I don't do this because I'm afraid of the volatility, I do it because it's practical and smart.

My focus is always on what can go wrong and what my response will be, but when it goes right I always take advantage of the situation, and aggressively add to my winning trades. My advice is to trade your balls off, aggressively add to your winners, press your trades, and stay out of trouble, as if this could all end tomorrow, because it most certainly will (eventually).



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 Surly 
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tigertrader View Post
But, it's not just a matter of volatility, but the size and duration of the moves. The moves are much bigger and much faster than "normal", and this very salient fact, is highly correlated to one's opportunity to make money.


The markets moves are happening quicker and may be recurring with a higher degree of fidelity as result of the volatility.


Volatility is up approximately 3X, and in response I've cut my size back 1/3, because I know have to place my stops farther away. It doesn't make sense to start risking 6% on a trade when I normally risk 2%, just because volatility has increased.

OK, I want to challenge some of your statements a bit but definitely in the context of myself being the student and you being the teacher.

Your first two statements above seem to agree with my "reason #2" which was that the increased volatility (low liquidity) does make it easier to trade - in other words, the increased volatility makes one's tradeable patterns more consistent ("higher degree of fidelity" and "highly correlated to one's opportunity to make money").

If this is the case, then it follows that one should be trading with increased risk because expectancy is higher. In drawing this conclusion I am making the assumption that risk:reward is a constant and that the different market conditions simply increase %win. An increase in %win, when coupled with a constant risk:reward, means that your system is just working better and this, to me, means you should be willing to increase your risk per trade because over a series of trades (given a higher %win) your TOTAL RISK will be lower.

To illustrate what I mean, if you normally risk $500 per trade and win 50% of trades then over 20 trades you will lose (statistically speaking) $5000. If your % win goes to 75% then if you want to risk $5000 over 20 trades you can increase your risk per trade to $1000. Thus, if your stops have to grow by 3x (in ticks) your position size does not need to decrease by a factor of 3 but only by a factor of 1.5 to keep the same risk over a group of 20 trades.

I do realize that it is more comfortable to keep the absolute size of your stops (in dollar terms) constant by deceasing position size in direct proportion to the increase in absolute stop size in ticks, but trading rarely rewards the comfortable path.

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 kbit 
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Surly View Post
OK, I want to challenge some of your statements a bit but definitely in the context of myself being the student and you being the teacher.

Your first two statements above seem to agree with my "reason #2" which was that the increased volatility (low liquidity) does make it easier to trade - in other words, the increased volatility makes one's tradeable patterns more consistent ("higher degree of fidelity" and "highly correlated to one's opportunity to make money").

If this is the case, then it follows that one should be trading with increased risk because expectancy is higher. In drawing this conclusion I am making the assumption that risk:reward is a constant and that the different market conditions simply increase %win. An increase in %win, when coupled with a constant risk:reward, means that your system is just working better and this, to me, means you should be willing to increase your risk per trade because over a series of trades (given a higher %win) your TOTAL RISK will be lower.

To illustrate what I mean, if you normally risk $500 per trade and win 50% of trades then over 20 trades you will lose (statistically speaking) $5000. If your % win goes to 75% then if you want to risk $5000 over 20 trades you can increase your risk per trade to $1000. Thus, if your stops have to grow by 3x (in ticks) your position size does not need to decrease by a factor of 3 but only by a factor of 1.5 to keep the same risk over a group of 20 trades.

I do realize that it is more comfortable to keep the absolute size of your stops (in dollar terms) constant by deceasing position size in direct proportion to the increase in absolute stop size in ticks, but trading rarely rewards the comfortable path.


All your math has me confused but You have to keep in mind when you look at a trade it's not "how much can I make" but should be " how much could I lose". My 2 cents

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 tigertrader 
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Your logic makes sense, and you are absolutely correct about the comfortable path; what feels good is often the wrong thing to do. I am probably taking an overly reactive view of risk.

Would your maximum daily ruin remain the same, or would you raise that number proportionally?


kbit,

At all times, given the risk you are taking, your account size, and the volatility of the market, you must know the optimal number of contracts to be long or short. Risking too little is bad, because it doesn't give the market the opportunity to allow your profitable trade to take place and grow, and risking too much, you run the risk of ruin. Most traders make the mistake of taking a reactive view of risk, in which their overriding concern is avoiding losses and protecting small profits, in lieu of a more aggressive management of risk which would result in a more efficient use of capital. Proper money management optimizes the use of your capital.

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 Surly 
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tigertrader View Post
Would your maximum daily ruin remain the same, or would you raise that number proportionally?

That's an excellent question actually. For myself, my daily stop loss (maximum daily ruin) exists because some days I am just not reading the market as well as others, or I'm overly reactive to losses or wins, or the market is behaving in such a way as to not reward my method of trading. All these (with the possible exception of the third) lie outside the statistical reasoning I used in my post. In instances like the markets we've had the last two weeks, I would plan to be very conscious of why I am losing as I approached my daily stop loss and adjust that daily stop loss upward if I could be confident that my losses were not due to any of these factors. This is a slippery slope though and touches on why discretionary trading will always have an element of "art" to it.

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 tigertrader 
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Bulls should still be in charge - would look for support 1171.00-1173.00, with an upside target of 1232.00 (50% retracement). Nevertheless, we should not ignore the fact the market pulled back to exactly the 38.20% retracement level and failed. My feeling is that this is still a dead cat bounce, but markets often under-shoot or over-shoot their objectives, so a failure from any level is possible.

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 tigertrader 
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Good article on adapting to an HFT environment!

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 tigertrader 
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What turned out to be a relatively ugly range day saw the ES test the 1202.00 level and fail for the second day in a row As I mentioned earlier this level represents a 38.20% retracement of the July/August down move and is quickly becoming a line drawn in the sand. Liquidity appears to have returned back to normal (except when it was pulled during the Merkel/Sarkozy meeting) and volatility has subsided for now. With options expiration upon us, ant it’s attendant seasonality for reversing short term trends, we must be cognizant of the 2bar double top at 1202.00 and the possibility the market could sell off from this level.

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 Private Banker 
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tigertrader View Post
What turned out to be a relatively ugly range day saw the ES test the 1202.00 level and fail for the second day in a row As I mentioned earlier this level represents a 38.20% retracement of the July/August down move and is quickly becoming a line drawn in the sand. Liquidity appears to have returned back to normal (except when it was pulled during the Merkel/Sarkozy meeting) and volatility has subsided for now. With options expiration upon us, ant it’s attendant seasonality for reversing short term trends, we must be cognizant of the 2bar double top at 1202.00 and the possibility the market could sell off from this level.

I agree. There definitely seems to be some resistance that match many trading approaches criteria for a potential reversal such as fib levels and double tops, etc. Hopefully tomorrow will be a bit more exciting even though the volatility did pick up a bit today.

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 tigertrader 
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Short ES @average of 1187.50 with a price target of 1166.00.

Euro needs to stay under 1.4370, however.

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 Michael.H 
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Im still considering to go short on a higher bounce, but 2 things i don't like. capitulary volume and very bearish setiment. Will wait and see how this turns out. Might go long if im wrong, but so far, short bias. No positions yet.

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 Lornz 
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Surly View Post
OK, I want to challenge some of your statements a bit but definitely in the context of myself being the student and you being the teacher.

Your first two statements above seem to agree with my "reason #2" which was that the increased volatility (low liquidity) does make it easier to trade - in other words, the increased volatility makes one's tradeable patterns more consistent ("higher degree of fidelity" and "highly correlated to one's opportunity to make money").

If this is the case, then it follows that one should be trading with increased risk because expectancy is higher. In drawing this conclusion I am making the assumption that risk:reward is a constant and that the different market conditions simply increase %win. An increase in %win, when coupled with a constant risk:reward, means that your system is just working better and this, to me, means you should be willing to increase your risk per trade because over a series of trades (given a higher %win) your TOTAL RISK will be lower.

To illustrate what I mean, if you normally risk $500 per trade and win 50% of trades then over 20 trades you will lose (statistically speaking) $5000. If your % win goes to 75% then if you want to risk $5000 over 20 trades you can increase your risk per trade to $1000. Thus, if your stops have to grow by 3x (in ticks) your position size does not need to decrease by a factor of 3 but only by a factor of 1.5 to keep the same risk over a group of 20 trades.

I do realize that it is more comfortable to keep the absolute size of your stops (in dollar terms) constant by deceasing position size in direct proportion to the increase in absolute stop size in ticks, but trading rarely rewards the comfortable path.

The hard thing is to quantify your % win and also whether or not the favorable conditions will continue. Miscalculations will lead to a greatly increased "risk of ruin". But position sizing definitively has a place in trading...

I recommend reading the work of Edward Thorp and Dr. William Ziemba, a lot of the gambling theories translates well to trading.

In fact, they just published a compilation of the research papers regarding the Kelly Criterion:
Amazon.com: The Kelly Capital Growth Investment Criterion: Theory and Practice (World Scientific Handbook in Financial Economic Series) (9789814293495): Leonard C. MacLean, Edward O. Thorp, William T. Ziemba: Books

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  #749 (permalink)
 Lornz 
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Michael.H View Post
They're norwegian.... They work for a investing firm. We still keep in touch, its amazing how tight the regulations are over there. He wanted to send me some ideas for stocks, and later found out that i can't if i have us citizenship.... Very interesting. Guess thats why your economy has been so stable for so long, and we go through shit like this every 8 years.

Ok, interesting. The finance business is such a small "community" in this country, so you made me quite curious about where they work. I know a few traders, but I'm always interested in expanding my network...

Regulations are quite tight, yes. We did have our own bank crisis in the early 90s, and that tightened up regulations even more..

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 tigertrader 
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Im still considering to go short on a higher bounce, but 2 things i don't like. capitulary volume and very bearish setiment. Will wait and see how this turns out. Might go long if im wrong, but so far, short bias. No positions yet.


Yes, there was capitulation selling, it was a swing bottom. However, sentiment is actually slightly bullish - ISE Sentiment Index was at
103 yesterday and is trending bullish longer term although "dumb money" does appear to be VERY short. If the ES does take out 1202.00, it will probably trade up to 1232.00/50% level, and who knows maybe they will even run it up and take out the July or even the May highs -anything is possible. But for now, the bears aren't allowing the market to get back over the 1202.00/38.20% level.

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 tigertrader 
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As mentioned previously, short term trends have a tendency to reverse during op ex week. Today’s early action was classic bear trap as the ES rallied early, taking out the double top at the 1202.00 level by 5.00 points and failing. The euro showed early relative weakness to the ES and a bearish divergence, as it made new highs and was the first to roll over, while a bearish oil inventories number sealed the deal.

It is possible large players took advantage of the weak handed shorts (small specs), and squeezed them out of the market in order to cover their longs and get short. This would imply that a top is in, and we will break tomorrow on CPI, payrolls, et al. On the bullish side of the coin, today could have been a play (mean reversion back to the 50EMA) by the longs, to knock down the price so that they could accumulate a bigger long position on the backs of the weak longs, going into tomorrow's numbers. From the 2nd chart below, we can see that realized liquidity got thicker, along with implied liquidity (bid/ask), suggesting it was large players at work.

While I was originally leaning toward the first scenario, the fact that "dumb" money is so short, implies that the most pain would be felt, if the market were to rally and make new highs. This of of course does not preclude the market breaking first, trapping more shorts, and then rallying. Note the ES bouncing off the 50EMA on the attached 135 min chart.

On a longer term time frame chart, there is a major divergence in the MFI on the ES weekly chart. The MFI is an oscillator that uses both price and volume to measure buying and selling pressure, and is used to determine the conviction in a current trend. If you look at previous swing bottoms, they were all accompanied by rises in the MFI. However, MFI continues to fall in the current rally, implying the rally is being sold into. This lends support in the theory that if the market does rally, it should be sold (1232.00/50% ).

Also included is a daily chart of CL which shows the market approaching major resistance @89.77 which represents the monthly S2, 20EMA, and the neckline of the H&S top formation. A rejection from this level would have a minimum measuring implication of 26.00 dollars, which provide us with a price target of $64.00.

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 tigertrader 
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Euro short or reversal?

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 Big Mike 
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Euro short or reversal?

Yes.

Mike

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 tigertrader 
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Yes.

Mike

The answer is - short!

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 tigertrader 
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Crude Oil Wave Count

&


Euro Blue Plate Special

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 Private Banker 
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ES finally gave in to resistance and puked. Should this measured move follow through, we should take out the low of 1077 and have a target area of the 1022 area. Doubt that'll happen in one day of course but that's what I'm looking for should we get past the last swing low of 1077.

On a side note, BAC has established another island.

Cheers,
PB

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 Private Banker 
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I'd also like to offer the other side of things here as I don't want to sound too bearish biased with regards to the direction of the ES. If you look at the attached chart, we have now retraced 50% from the low of 1077 where there could be a bounce. A break below the 61.8% level could signal a victory for the bears however.

In any event, I remain unbiased and continue to trade the intra-day opportunities.

Cheers,
PB

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 Private Banker 
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One last thing I wanted to point out that occurred today. The yield on the 10 year has dropped below 2.00% to 1.978%. This is below the swing low in 2008's chaos... Pretty amazing.

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 Lornz 
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It's nice to see some real moves again... Not unexpected that the news was grim today, but the market seems to overreact to most news these days. That is good news (if you pardon the pun) for traders, though...

It will be interesting to see how things develop in the months ahead, but I find it hard to believe that this is the start of a new bull market. A slow-growing economy is a likely scenario, as all governments will do whatever it takes to avoid a recession. But as I have stated earlier, I have been positioned heavily on the bearish side for quite some time... And I haven't given up "hope" yet...

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 tigertrader 
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Lornz View Post
It's nice to see some real moves again... Not unexpected that the news was grim today, but the market seems to overreact to most news these days. That is good news (if you pardon the pun) for traders, though...

It will be interesting to see how things develop in the months ahead, but I find it hard to believe that this is the start of a new bull market. A slow-growing economy is a likely scenario, as all governments will do whatever it takes to avoid a recession. But as I have stated earlier, I have been positioned heavily on the bearish side for quite some time... And I haven't given up "hope" yet...


It's not so much that the market over-reacts, it's a little more contrived than that. When the large traders have a big short position on, especially when the market gaps to the downside, they will"pull" the liquidity, to see if there will be material follow through. This allows the market to "free-fall", exacerbated by the bots, of course.

You can see from the attached chart, that liquidity (was pulled) dropped precipitously on the break, and then returned to normal levels...mission accomplished. ( Higher bars on the histogram, mean less liquidity, and lower bars mean higher liquidity.

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 tigertrader 
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As alluded to yesterday, the euro showed relative weakness to the ES on new highs, which signaled yesterday’s bull trap, and led to the overnight sell-off in equities and the euro, on renewed fears of European bank problems. Also mentioned, was the possibility large players were squeezing the weak handed shorts out of the market in order to cover their longs and get short, in front of today’s numbers. The scenario played out, as this morning, CPI came in hot at 0.5% M/M and 3.6% Y/Y and Jobless Claims disappointed, leaving many to wonder if this is not evidence of the worst of all worlds, stagflation. As the market gapped down, liquidity was pulled (chart 1), and a quick flush ensued. Liquidity returned to normal after the break and the market traded in the bottom half of the range for the rest of the day, holding the monthly value area low (chart 3), and then rallying 18 handles at the end of the day to close on the VWAP (chart 2), as trapped shorts ran to cover. A very oversold market with high bearish sentiment readings as low as 60 at 10:50 this morning, and a still a very bearish 76 on the close, implies the market may have more to go on the upside, before the bear resumes.

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 tigertrader 
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Investors Turn More Bullish into Decline...Again

With stocks down sharply in the last two weeks and volatility on the rise, you would think that investors would be throwing up their hands and just giving up. Not so. This week's survey from the American Association of Individual Investors (AAII) showed that bullish sentiment rose for the second straight week from 33.4% to 35.6%

Courtesy of Bespoke - Thursday August 18, 2011

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 Michael.H 
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I was waiting for a bigger bounce, which so far hasn't materialized.... If we were to close below last week tomorrow, i will take a short. Its going against my rules, but closing below that hammer on the weekly, will screw alot of people. I will do smaller size since im shorting into weakness instead of strength. I want to see weakness on the Naz and Russ as well.

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 Michael.H 
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Lornz View Post
Ok, interesting. The finance business is such a small "community" in this country, so you made me quite curious about where they work. I know a few traders, but I'm always interested in expanding my network...

Regulations are quite tight, yes. We did have our own bank crisis in the early 90s, and that tightened up regulations even more..

I later found out that it wasn't norway, but the US regulations thats preventing me to invest in some norwegian stocks. Looks like i was wrong. Do you know any other way around it. Was looking for relatively low beta, high yield. So far he gave me statoil, orkla, and norks hydro. Norsk hydro has anemic volume. Orkla looks a bit better.

He said the only way he knows how is through goldman. Us laws prohibit me from opening an account with him at his firm.

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 tigertrader 
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After having rallied late in the day to close near the VWAP, the ES and Euro sold off last evening and traded as low 1117.25( tested low of value area) on carry-over weakness from yesterday's sharp sell-off . Weakening global economic growth, the European debt crisis, and concern about the European banking system are still the headlines that concern the markets, however, they are extremely over-sold along with very bearish near term sentiment. Ironically, longer term sentiment is still bullish. Therefore, a relief rally is expected. Resistance is 1153.00, 1167.00, and 1185. However, the ES is showing early relative weakness to the Euro, which may be op ex related, but may be an indication of underlying weakness in the ES.

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 kbit 
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I want a rally ...UNDERSTAND !!

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 Private Banker 
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This market continues to move within it's measured move while multiple micro moves are taking place providing for great intra-day trade opportunities. Market finally closed below the 1128 level (just barely) but still within somewhat of a supported area. The market had a bumpy ride down this afternoon but ended up closing near the low of the day.

Looking at the daily chart, everything is moving as expected to take out the swing low of 1077. We'll see how it goes of course as there's no sure thing in the markets. But if we do break below 1077, I would think we would get to around the 1022 area as I mentioned before.

Looking at the VIX, we touched the same area high as May 2010 and would think we would break higher then that should things progress to the downside. Things are definitely getting interesting in many aspects. My favorite BAC is still stranded on it's second bearish island. They've made announcements of job cuts of 3,500 but I'm sure that number will grow as things heat up for them.

Looking forward to next week!

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 tigertrader 
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An over-sold ES rallied to the aforementioned 1153 level and failed, only to trade down once more to my original downside target of 1120, closing down in excess of 0.5%. Historically, a one-way move lower immediately following a downside gap generally leads to a bit more follow-through over the next 1-3 sessions. As you can see from the 60 min chart (chart 1), the volume profile shows little support below this level, so if this area were to be taken out, the shorts would most likely have 1100.00 in their sights or the absolute low of 1077 and 1060-1040 below that level.

Next week’s focus will be on reports which include Durable Goods and the first revision to Q2 GDP, (although it is extremely doubtful that either number could disappoint more than the Philly Fed Index did this week), along with continued concerns about the weakening global economic growth, the European debt crisis, and concern about the European banking system. With a 9% decline this week, it wasn't pretty for the European banking sector. Based on the Bloomberg Index of European banks and financial services stocks, the sector is down 25% in less than a month and has now given up 70% of its gains off the March 2009 lows. Last week, regulators in Europe tried to stem the bleeding in the sector by suggesting a ban on short selling of stocks in the sector. After a brief rally following the news, European banks resumed their downtrend and closed out the week at a new low.

What we are now faced with is a market with a very bearish short term sentiment, but a bullish long term sentiment. Intraday numbers reached as low as 59 today at 9:50 this morning and were at 69 at 4:15 PM, however the 20day and 50day moving averages still have bullish readings, along with the AAII sentiment readings showing bullish sentiment rising for the second straight week. The overall chart of $VIX remains in an uptrend, and that is another intermediate-term bearish indicator, along with very negative, but oversold breadth indicators. Both large specs (smart money) and small specs (dumb money) are extremely short (chart 3), with open interest at levels where swing bottoms can take place, which leaves the market vulnerable to sudden corrective moves to the upside.

While the Bernanke and Obama would lead us to believe that the economy is stronger than we believe, this earnings season was more than two and a half times as bad as the previous worst earnings season. Sixty-percent of companies that reported went down in response to their reports, and nearly 30% went down more than 5%. Which of course, leaves us wondering when, or more appropriately, in what form will QE3 take place (chart 6). The closer we get to the election, the higher the political cost, large scale asset purchases may carry. So QE3 may have begun to take shape in the form of dollar liquidity swaps. A central bank liquidity swap is is a type of currency swap used by a country's central bank to provide liquidity of its currency to another country's central bank (att. 4). The swap lines are designed to improve liquidity conditions in U.S. and foreign financial markets by providing foreign central banks with the capacity to deliver U.S. dollar funding to institutions in their jurisdictions during times of market stress. As reported by Zero Hedge, the FRBNY announced it lent out $200MM to the SNB (chart 5), which may have been taken as a signal that the liquidity crisis is about to take an exponential step further.

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 Lornz 
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Thanks to the thread , I took a walk down memory lane and suddenly remembered the brilliance of "NEWStopia". It was never released on DVD, but thankfully I found a torrent.

I thought the following clip would be relevant for this thread:


"People drop; fewer people; less demand; prices drop" haha

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 Lornz 
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Michael.H View Post
I later found out that it wasn't norway, but the US regulations thats preventing me to invest in some norwegian stocks. Looks like i was wrong. Do you know any other way around it. Was looking for relatively low beta, high yield. So far he gave me statoil, orkla, and norks hydro. Norsk hydro has anemic volume. Orkla looks a bit better.

He said the only way he knows how is through goldman. Us laws prohibit me from opening an account with him at his firm.

You can just trade the ADRs. See the full directory of Norwegian ADRs here:
BNY Mellon Depositary Receipts - DR Directory

As for the specific companies you mentioned:
ADR - Hydro Internet
Orkla ASA - ADR
Our ADR programme

However, some of the most interesting "Norwegian" companies listed on OSE (in my years of trading) have been those of shipping tycoon John Fredriksen. His companies are mostly based out of Bermuda (and Cyprus), however, so they are not technically Norwegian. Some of his companies have dual listings (Frontline and Seadrill are listed on NYSE, and Golar on Nasdaq, in addition to being listed on OSE, of course)

This might not be the best time to get in, though. I've always viewed SDRL ( Stock information - Hugin - Seadrill ) as my path to retirement. JF always structures his companies very lean, and pays out substantial dividends. I think both SDRL and GOL will give substantial returns over a long horizon, but we might have some troublesome years ahead in the global markets. Therefore please don't take this post as investment advice. Statoil and Orkla should fare well, too. I've also had a position on in DNO for years (they found oil in Iraq), that I consider my "lottery ticket". But as I said earlier, you very might be given the opportunity to buy those companies at a substantial discount in the near future. I am merely commenting on the viability of these companies over the next decades. The world will still run on oil and the increasing middle class of the BRIC countries will lead to higher demand. Thus SDRL remains one of my favorite stocks for the long-term future, but I am actively trading in and out of it. In addition, I think FRO will rekindle its glory days a few years down the line.

As for trading/investing on OSE, you need a VPS account. My brokers did not seem to offer an English sign-up page, but the largest bank in Norway, DnB NOR, does have information in English. As far as I can tell, it is possible to for US citizens to open an account there (see attachment)

https://www.dnb.no/global/ikke-tilgang/dnbnor.html

Oslo Børs - Oslo Børs

Oddly enough, Marketwatch had an article about Norway yesterday:

Oil sustains Norway as EU wallows in debt - MarketWatch

Keep in mind that the OSE is closely linked to oil, so it has some pretty wild swings. It seems most global moves have an exaggerated effect on the Norwegian market. I don't trade much intraday on OSE (due to liquidity/spread and other factors), but it is one of my favorite exchanges for swing trading stocks.

Btw, NHY is one of the heavily traded companies on OSE, and volume is definitely not "anemic".

I apologize for derailing the POMO thread...

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 tigertrader 
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Incredible as it may seem, FRNYB President Bill Dudley, said the other day, that he expects second half growth should be "considerably firmer" than the first half. But the world's other economists, the bond and stock markets, and the oil market ( crude fell nearly 7%), seem to disagree. Apparently, what he really meant, was they can't get much worse. After the Philly Fed Index ( expected to be +2.0) reported -30.7, which was near the worst levels of the 2001-02 recession and not far from the lowest levels of 2008, he must have felt the odds were in his favor. The always insightful, Charles Hugh Smith, thinks otherwise, of course. He explains why in the following article.





The Fed Cannot Stave Off the Inevitable Market Revaluation

August 18, 2011


The Fed has yet to learn that you can't fool Mother Nature for very long, but it's about to get a punishing lesson. Did the Federal Reserve's QE2 program last year simply push the inevitable stock market decline forward a few months? It would seem so. In Remind Us Again Why Anyone Should Own Stocks For the Next Two Years (August 3, 2011) and The Junkie in the Pool and False Idols: Faith in Wall Street and The Fed Has Has Eroded (August 10, 2011) I included a chart of the current S&P 500 plotted against the two Great Bear Markets of last century, the Great Depression-era Dow Jones Industrial Average (1929 crash) and the Nikkei stock market from 1989.
It certainly looked like all the Fed accomplished with its $600 billion QE2 was stave off the inevitable by a few months:

Courtesy of The Chart Store, here is more evidence that the Fed just pushed the day of reckoning forward a few months: the first charts the current NASDAQ market plotted over the Great Depression Dow, and the second plots the current NASDAQ over the post-1989 Nikkei market.
The similarity of the two Bear market progressions is uncanny. As Ron Greiss of the Chart Store notes on the chart, "Did QE2 prevent nature from pursuing its intended course?" Judging by the recent "unexpected" cascade in stock valuations, it seems the Fed has yet to learn that you can't fool Mother Nature for very long:

Once again it looks like the Fed's attempt to stave off the inevitable crash in stock market valuations was temporary rather than permanent:

This week we see the same game plan being worked once again: smash the U.S. dollar and juice the risk trade, as if the inevitable recalibration with reality can be staved off forever. Judging by these three charts, that recalibration will take about another two years.
Perhaps when the stock market reaches its inevitable (i.e. unmanipulated) true value some time in 2013, then the Fed's attempts to fool Mother Nature will be seen for what they are: catastrophic failures.
Here is a bonus chart, courtesy of The Chart Store, that overlays the current rally and collapse with the Dow's 1907 crash. The similarity is rather uncanny:

As we can see, The Fed's QE2 didn't change the future decline, it simply pushed it forward a few months: the current market has now caught up with the 1907 decline.
With inflation rising and the markets falling, just how effective do you reckon QE3 or any other gambit will be in staving off reality?

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 Michael.H 
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Thanks Lornz ... I know whats going on in the market, so no worries about that. I don't want ADR's s simply because i wanted to get paid dividends in norwegians krona, as opposed to US dollars. I can handle the timing of the markets, but need more info on the actual companies. I like norway since they're more stable, and aren't tied to the Euro or the US dollar. I also know of John Fredriksen, he's the richest man in Norway.... I will prob send you a PM so we don't get off topic on this thread, and you can go ahead and shoot me a PM if you need anything. Appreciate the help

BTW, i caught your post in another thread. Its funny how swedes and norwegians like to pick on each other. You can always sense that sibling rivalry. Can't tell you how many swede/norwegian jokes i've heard from my friends.. lol Cracks me up

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 Lornz 
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Michael.H View Post
Thanks Lornz ... I know whats going on in the market, so no worries about that. I don't want ADR's s simply because i wanted to get paid dividends in norwegians krona, as opposed to US dollars. I can handle the timing of the markets, but need more info on the actual companies. I like norway since they're more stable, and aren't tied to the Euro or the US dollar. I also know of John Fredriksen, he's the richest man in Norway.... I will prob send you a PM so we don't get off topic on this thread, and you can go ahead and shoot me a PM if you need anything. Appreciate the help

BTW, i caught your post in another thread. Its funny how swedes and norwegians like to pick on each other. You can always sense that sibling rivalry. Can't tell you how many swede/norwegian jokes i've heard from my friends.. lol Cracks me up

I apologize, I did not mean to seem condescending. I just wanted to cover my bases; I'd hate for you, or anyone else reading this thread, to lose money on my "advice"...

For the reasons you stated, investing in Norway might be a good idea. It is definitely how I am positioned with regard to my longer term positions. PM me any time, it is always interesting to discuss such topics...

Haha, the Swedes are a great source of comedic inspiration... We've become invaded by them again in recent years; They have taken over the service industry, the wages are so much higher here in Norway (I guess the Euro isn't all positive). I'm happy about it, though. They are significantly more service-minded than Norwegians, I have to give them that. In addition to being the scum of the earth, I mean...

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 Michael.H 
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none taken my friend Ill keep in touch.

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 tigertrader 
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Equities down, but dollar closes lower...

Commodities, energy, long bonds, and gold, up... but euro closes higher

Bounce on Monday, or "stagflation" being priced into the market ?

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 jonc 
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The market is showing strength today despite the not so good news. If it can close high today, I think we would see a rally all the way to Friday's speech in Jackson Hole.

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 tigertrader 
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The market is showing strength today despite the not so good news. If it can close high today, I think we would see a rally all the way to Friday's speech in Jackson Hole.

Yes, risk trade, is back on...for now.

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 Michael.H 
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Looks like we're getting that bounce i was going for. Generally, you want to watch for divergences between markets and stocks to get a good entry. Usually a higher high, higher low... etc
Let see how it works out.

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 jonc 
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Looks like we're getting that bounce i was going for. Generally, you want to watch for divergences between markets and stocks to get a good entry. Usually a higher high, higher low... etc
Let see how it works out.

Are you looking to short on the bounce?

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 Michael.H 
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thats the goal

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 tigertrader 
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jonc View Post
Are you looking to short on the bounce?


Notice the highs of the day the past 2 days!

The ES should be able to rally to at least ~1185, where there are a lot of old longs that would relish the opportunity to get out there with a scratch, and could very well end up testing the ~1230 area - 50% retracement of the down leg,

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 tigertrader 
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Looks like the ~1185 area, it is.

From 08/19/2011 - " Therefore, a relief rally is expected. Resistance is 1153.00, 1167.00, and 1185."

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 tigertrader 
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ES is holding yesterday's low, however market internals look very weak - support is in the ~1150 area.

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 tigertrader 
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Equity markets surged early today on news that Warren Buffett agreed to “invest” $5BB in BAC, only to sell off from 1188.50 as DAX futures were aggressively sold as a hedge to circumvent the European short selling ban. But, unlike yesterday, ES closed weak on the day, in the lower half of it's range. Whether it was Kris Kringle or Ben Bernanke, providing the Bounce and Bail, before the Jackson Hole summit tomorrow morning, trapped longs must have felt that Christmas had come 4 months early, as their prayers were answered and they were given the gift of exiting their longs at break even.

Of course, the rally began a week ago, only to end abruptly, and trade back down to its lows at 1,110 -1120. And only after a 4-5 days of testing that area and suffering more than a few false starts, during which the index closed near that 1,120 level each day, did the market finally rally. It was initially supported by extremely oversold conditions, but had begun to garner some other underlying strength as well, when the market was accepted above the 1145 level.

Throughout this period, the bullish sentiment had increased, with this week being the third consecutive week. According to the American Association of Individual Investors (AAII), bullish sentiment rose to 36.44%, which is the highest reading since the end of July. What is so surprising about this fact is the S&P 500 is still on pace for its fourth worst month of August in history, and is trading near the lows of the year.

The implication then, is that expectations of further easing are running very high, which also means that there is plenty of room for a major disappointment, and a retest of that 1120 level once more. On a Bernanke bounce however, we could see the market trade back up to the 1230.00 level, but I would expect it to fail from there.

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 tigertrader 
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Real Sh*t: Felonious Munk Presents "Stop It B! OBAMA PAY YOUR F*ckin BILL" - YouTube

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 tigertrader 
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Lines are drawn in the sand...

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 Lornz 
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@Private Banker

Have you retired?

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 Michael.H 
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looking for 125 area on the SPY for an entry. It depends on how the market reacts around there, then ill take a short. this is way too low for a short entry still. That capitulation i was talking about needs time to work itself out.

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 tigertrader 
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Michael.H View Post
looking for 125 area on the SPY for an entry. It depends on how the market reacts around there, then ill take a short. this is way too low for a short entry still. That capitulation i was talking about needs time to work itself out.


I bet you we see 105.00 before we see 125.00

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 Michael.H 
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Maybe... I just consider that a good entry point. If it gets there, great, if not, then ill figure out what to do then.

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 tigertrader 
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For some unknown reason, investors and the markets not only breathed a sigh of relief, but went on a buying spree today, as the the major averages posted their first weekly gains since July. For the week, the Dow Jones Industrial Average was up +4.3%, S&P 500 Index rose +4.7%, and Nasdaq Composite Index tallied a +5.9% gain. The indices finished Friday near their session highs after getting hit for a 2% loss on the announcement out of Jackson Hole. In fact everything with the exception of the U.S. dollar and the Swiss Franc closed higher on the day. Bernanke did not launch any new extraordinary policies, but the markets took his comments, that the FOMC would consider additional measures at its September meeting, as a signal more easing might be on tap. However, ECB President Trichet is also speaking on Saturday, which is certainly just as important as Bernanke's speech today, and more likely to produce something more shocking.

While a sense of calm has certainly settled in after the ES held the 1120 area, and bounced back up to the 1185 break-even area for the longs, the lack of leadership in the market should be of great concern to the bulls. On the NYSE and on the Nasdaq exchange new 52-week lows totals still solidly outnumbered the new 52-week highs totals. A rally that is sustainable should be accompanied by stocks hitting new 52 week highs. There has been much talk about the fact that the market experienced a distribution day soon after Tuesday’s follow-through-day. Historically, when a distribution day occurs on the first or second day after a follow-through day, the "uptrend" reportedly has failed 95% of the time.

On a day when the appetite for risk appeared to have returned, the gold and bond markets both came roaring back today, and appear poised to trade higher, while crude oil showed relative weakness to equities, and the DAX seemed ready to make new lows. The VIX continues to remain in it’s uptrend, even though the market rallied from 1110-1188, and may be forming a bull pennant, adding further evidence of bearish divergences. Whether the continued high volatility is caused by a lack of liquidity, or uncertainty about rapidly changing market fundamentals, or the lack of liquidity is caused by the high volatility, this negative feedback loop is sure to continue off-and-on, unless the Volker Act is repealed and the handcuffs are removed from Wall Street’s banks.

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 jonc 
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Does anyone believe that we might actually see S&P at 1400 by year end? No?

I actually think there is a possibility

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 Private Banker 
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Lornz View Post
@Private Banker

Have you retired?

Lol! No, just been busy trading and some other projects. Yesterday was incredible in fact, this month has been unbelievable! Still just intra-day trading the ES. Not sure if anyone referenced this already but the big picture has formed a massive bear flag through this huge swings. Pretty wild.

Cheers,
PB

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 tigertrader 
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Private Banker View Post
Lol! No, just been busy trading and some other projects. Yesterday was incredible in fact, this month has been unbelievable! Still just intra-day trading the ES. Not sure if anyone referenced this already but the big picture has formed a massive bear flag through this huge swings. Pretty wild.

Cheers,
PB


The problem with technical analysis is that it can be very subjective and open to interpretation, which is a critical factor to keep in mind. It is the technicians and not the market itself, that perceives these abstract formations, assign significance to them, and then base their decisions upon this analysis, thereby fulfilling their prophecy.

In the first 2 charts, we can see a classic bear flag, followed by a bear pennant, both of which carry a strong implication of a bearish continuation in price. In the 3rd chart we see an interpretation of a diamond formation.

Diamond formations turn out to be continuation patterns the majority of the time, but can also be a reversal pattern, albeit less frequently than they are a continuation pattern, and more often as tops than bottoms.

Nevertheless, the market appears to be headed lower, unless of course - it goes higher, in which case the technicians will be calling the pattern, a diamond reversal formation.

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 Private Banker 
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tigertrader View Post
The problem with technical analysis is that it cam be very subjective and open to interpretation, which is a critical factor to keep in mind. It is the technicians and not the market itself, that perceives these abstract formations, assign significance to them, and then base their decisions upon this analysis, thereby fulfilling their prophecy.

In the first 2 charts, we can see a classic bear flag, followed by a bear pennant, both of which carry a strong implication of a bearish continuation in price. In the 3rd chart we see an interpretation of a diamond formation.

Diamond formations turn out to be continuation patterns the majority of the time, but can also be a reversal pattern, albeit less frequently than they are a continuation pattern, and more often as tops than bottoms.

Nevertheless, the market appears to be headed lower, unless of course - it goes higher, in which case the technicians will be calling the pattern, a diamond reversal formation.

TA is in the eye of the beholder for sure. I've been trading and managing money (screen based) for a long time and understand the many perspectives TA can provide with each day's PA. There is no problem with TA it's how it's perceived/interpreted that becomes problematic. This is what I've observed thus far but with each new trading day comes the potential for a change in pattern, etc. I'm not biased in which way it will break as I'm trading the intra-day opportunities but I do think this giant formation is incredible.

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 tigertrader 
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Does anyone believe that we might actually see S&P at 1400 by year end? No?

I actually think there is a possibility

Based upon the the S&P's current price, and volatility, the probability that we will see 1400 by the end of the year is relatively low (~17%)

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 tigertrader 
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TA is in the eye of the beholder for sure. I've been trading and managing money (screen based) for a long time and understand the many perspectives TA can provide with each day's PA. There is no problem with TA it's how it's perceived/interpreted that becomes problematic. This is what I've observed thus far but with each new trading day comes the potential for a change in pattern, etc. I'm not biased in which way it will break as I'm trading the intra-day opportunities but I do think this giant formation is incredible.


It's really more than the fact that TA is dynamic and open to interpretation.

The very significance and useful application of technical analysis (TA) in the traditional Magee and Edwards sense, may no longer be as effective, or even work at all. HFTs and quantitative analysis (QA) may have rendered TA obsolete, or it may just be that this is a cyclical phenomena, and QA is the “A” du jour.


QA in of itself, is not perfect, because one of the weakness of statistics is the problem of changing distributions, and unknown variables in a data series. Though QA is forward looking, it still relies on historical data. Nevertheless, QA is certainly more prevalent among Wall Street and professional traders, which of course, plays right into the self-fulling prophecy theory of why it may be effective.


That being said, this may be just another example of the competitive exclusion principle, working itself out in the markets. We may be seeing two competitive schools of thought that cannot co-exist. When one technique has even the slightest advantage or edge over another, then the one with the advantage will dominate in the long term. One of the two competitors will always overcome the other, leading to either the extinction of the competitor, or an evolutionary or behavioral shift towards a different niche.


While short- term, mean-reversion trading is not a new strategy, it has assumed a dominant role, at this point in history, as the methodology de rigeur, because of it’s effectiveness in a HFT and AT dominated environment. Whether HFTs have an affect on long term time-frames is debatable, but there is no denying what drives markets over the short-term, when directional institutional traders are not active.


Currently, the implementation of the Volker Rule may also be altering the behavior of the markets. Limiting dealers’ ability to position speculatively, is going to have a long term affect on (implied liquidity) the b/a depth, and consequently on realized liquidity. As liquidity shrinks, volatility rises as it takes less size to move the market. Liquidity is often pulled intentionally to allow the market to “run,” but it is often diminished in response to risk.


When realized volatility rises, the risk management function at Wall Street dealer firms reads it as an increase in the firm’s VaR, and immediately adjusts it’s risk profile. The longer a period of volatility lasts, the bigger the effect on the market, because more and more of the “VaR window” represents volatile market conditions

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tigertrader View Post

It's really more than the fact that TA is dynamic and open to interpretation.

The very significance and useful application of technical analysis (TA) in the traditional Magee and Edwards sense, may no longer be as effective, or even work at all. HFTs and quantitative analysis (QA) may have rendered TA obsolete, or it may just be that this is a cyclical phenomena, and QA is the “A” du jour.


QA in of itself, is not perfect, because one of the weakness of statistics is the problem of changing distributions, and unknown variables in a data series. Though QA is forward looking, it still relies on historical data. Nevertheless, QA is certainly more prevalent among Wall Street and professional traders, which of course, plays right into the self-fulling prophecy theory of why it may be effective.


That being said, this may be just another example of the competitive exclusion principle, working itself out in the markets. We may be seeing two competitive schools of thought that cannot co-exist. When one technique has even the slightest advantage or edge over another, then the one with the advantage will dominate in the long term. One of the two competitors will always overcome the other, leading to either the extinction of the competitor, or an evolutionary or behavioral shift towards a different niche.


While short- term, mean-reversion trading is not a new strategy, it has assumed a dominant role, at this point in history, as the methodology de rigeur, because of it’s effectiveness in a HFT and AT dominated environment. Whether HFTs have an affect on long term time-frames is debatable, but there is no denying what drives markets over the short-term, when directional institutional traders are not active.


Currently, the implementation of the Volker Rule may also be altering the behavior of the markets. Limiting dealers’ ability to position speculatively, is going to have a long term affect on (implied liquidity) the b/a depth, and consequently on realized liquidity. As liquidity shrinks, volatility rises as it takes less size to move the market. Liquidity is often pulled intentionally to allow the market to “run,” but it is often diminished in response to risk.


When realized volatility rises, the risk management function at Wall Street dealer firms reads it as an increase in the firm’s VaR, and immediately adjusts it’s risk profile. The longer a period of volatility lasts, the bigger the effect on the market, because more and more of the “VaR window” represents volatile market conditions

Patterns will still be there to exploit, though... However, they might be more difficult to find.

Some concepts are as old as the markets themselves, and they are needed to facilitate trades.

I predict that squinting will be the best way to read charts....

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 Private Banker 
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tigertrader View Post

It's really more than the fact that TA is dynamic and open to interpretation.

The very significance and useful application of technical analysis (TA) in the traditional Magee and Edwards sense, may no longer be as effective, or even work at all. HFTs and quantitative analysis (QA) may have rendered TA obsolete, or it may just be that this is a cyclical phenomena, and QA is the “A” du jour.


QA in of itself, is not perfect, because one of the weakness of statistics is the problem of changing distributions, and unknown variables in a data series. Though QA is forward looking, it still relies on historical data. Nevertheless, QA is certainly more prevalent among Wall Street and professional traders, which of course, plays right into the self-fulling prophecy theory of why it may be effective.


That being said, this may be just another example of the competitive exclusion principle, working itself out in the markets. We may be seeing two competitive schools of thought that cannot co-exist. When one technique has even the slightest advantage or edge over another, then the one with the advantage will dominate in the long term. One of the two competitors will always overcome the other, leading to either the extinction of the competitor, or an evolutionary or behavioral shift towards a different niche.


While short- term, mean-reversion trading is not a new strategy, it has assumed a dominant role, at this point in history, as the methodology de rigeur, because of it’s effectiveness in a HFT and AT dominated environment. Whether HFTs have an affect on long term time-frames is debatable, but there is no denying what drives markets over the short-term, when directional institutional traders are not active.


Currently, the implementation of the Volker Rule may also be altering the behavior of the markets. Limiting dealers’ ability to position speculatively, is going to have a long term affect on (implied liquidity) the b/a depth, and consequently on realized liquidity. As liquidity shrinks, volatility rises as it takes less size to move the market. Liquidity is often pulled intentionally to allow the market to “run,” but it is often diminished in response to risk.


When realized volatility rises, the risk management function at Wall Street dealer firms reads it as an increase in the firm’s VaR, and immediately adjusts it’s risk profile. The longer a period of volatility lasts, the bigger the effect on the market, because more and more of the “VaR window” represents volatile market conditions

Lol! Sounds like you're over thinking this a little don't you think?

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 tigertrader 
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Private Banker View Post
Lol! Sounds like you're over thinking this a little don't you think?

As far as I'm concerned, the market is my enemy - it exists to fool me and take my money.

The more I understand and know about my enemy, the easier it will be to gain the advantage and defeat him.

It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.

Besides, I'm house bound on the East coast, stuck in the periphery of Irene...

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