Registered User
Joined: 1/27/2005
Posts: 6
|
I didn't go over the data woth a fine tooth comb but the last breakaway gap I see on the S&P 500
goes back to about March 13, 2003. Beginning of the bull market and the gap was never filled.
|
|
Registered User
Joined: 6/6/2005
Posts: 1,157
|
Hey Mistermax,
Thanks for the post. I love the opportunity to backtest new ideas and thoughts and you present an interesting one. I have only started a rudimentary backtest based on your post, but here is a thought. (yes, only one -- I have to rush out). Funny thing about gaps is that you never know what you're going to get until you've gotten it. There is no way to know if a gap is a runaway or if it's going to get filled until it has...or hasn't.
Regarding your gap, I'm assuming you mean this one in 03
The difference between thiis one and the one we've just had is this:
If you take a look in that downtrend a lot of "breakaway gaps" occured. Like this one:
Which became this:
And this:
Just to be sure I ran a quick backtest of buying all occurences where the s&p opened higher than the previous close over the last 10 years. It did result in a positive expectancy. 97 trades, 57% winners, avg gain .03% annualized at 4%.
Now, the interesting part. If you would have bought the gap downs, you would have an average gain of .06% annualized at 8%.
Interesting. That's why I love backtesting. opens my eyes to different things.
I hope you don't think this is an argument against you post. Your post just got me thinking and I thought i would check things out.
David John Hall
:
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
Don't I remember something called an "exhaustion gap" ?
|
|
Registered User
Joined: 12/31/2005
Posts: 266
|
i think theres a big difference between 2007 and 2003. in fact, its as if the charts are the exact opposite.
|
|
Registered User
Joined: 12/31/2005
Posts: 266
|
how do you backtest david?
|
|
Registered User
Joined: 6/6/2005
Posts: 1,157
|
Hi Driger,
I backtest using Telechart Companion, an uncomplicated little tool that can backtest any Telechart watchlist or PCF. I don't think I'm allowed to post a link here on the message board, but I've been using it for a couple years now, and it certainly has opened my eyes to the moevement of price and how it many times is counter intuitive. Also, unfdortunately, it has shown me that many standard indicators do very little to generate a positive expectancy over the long run. One exception being a very short term RSI (5 period RSI with a reading below 5) in an uptrending market can give excellent signals.
I also think you're spot on about the charts being the opposite then to now. I wonder if that means we'll get an opposite reaction. As I said in the initial post is that you never know until you know. The way this morning's gap filled right away with all the buying that came in at the open certainly leads me to believe that the FED news was priced into the first and second days of this move. But who knows. I look at the indexes through the filter of Donchian channels. the last signal that was given was a sell signal and has not been replaced by a buy signal. That said, i missed out on the upside bounce activity, but I get to keep my head and not go crazy switching long to short and back to long again.
Hope this helps.
David John Hall
|
|
Registered User
Joined: 12/31/2005
Posts: 266
|
thanks,
ta is comprehensive, so indicators only serve as confirmation. as for todays market, we'll never really know until we get a decisive breakout one side of the range on the other. i would bet we'll be stuck in this range for awhile.
|
|
Registered User
Joined: 4/18/2005
Posts: 4,090
|
I would think that if it's a worden product there isn't a problem putting links.. unless its a discontinued product?
do you do any testing with patterns? What are Dochian channels? I'm reading Connor "Advanced Trading Strategies" and trying to go through some of the more interesting looking ones that are easier to program. The 1-2-3-4 seems ok.. but actually Tobydad taught that to me on this forum..... or at least his version of it.
I'm gonna test out the "Spent market" strategy... which is basicaly a reversal bar strategy... with an added filter to increase validity... as he believes "Reversal bar pattersn sucessfully call 100 out of every 10 tops".
Then is a chapter on shorting strategies... "Crash and Burn" sounds flashy and glittery and "When There Late Theyre Probably Dead" sound like a late earnings release timing strategy... the philosophy that if they are late they are postponing for a reason.
|
|
Registered User
Joined: 1/1/2005
Posts: 2,645
|
In his post, David stated:
"... the s&p opened higher than the previous close ..."
Does anyone know how the opening price of SP-500 (or any index) is determined?
Thanks,
Jim Murphy
|
|
Registered User
Joined: 6/6/2005
Posts: 1,157
|
that book sounds great, I'll have to look into it. TC Companion isn't a Worden product, but it does run off worden data...I'm not sure how that works out. But it's super easy to backtest any pcf you can create.
Regarding Donchian Channels, they're just the price channels i show on a lot of my charts. hey were created by Richard Donchian in the 50's and used widely by the turtle traders to determine trend.
|
|
Registered User
Joined: 6/6/2005
Posts: 1,157
|
lol -- I knew that anytime I post a backtest result that I can expect to have Jim Murphy at my heels! I've come to rely on it. And I have to tell you -- it used to weird me out -- but not anymore. Now it just helps me focus. Thanks Jim.
I used the SPY and the backtest concerned itself with the open as displayed on any one of the bars shown on the chart. The little line jutting out to the left? That is what the backtest considered the opening. :)
If this is incorrect, and that would not signify the open, please let me know and I will backtest it another way.
It should be noted here, to anyone reading, that I would have been equally happy would the backtest have shown different results. I am on a fact finding mission. I do not subscribe to any particular belief or side of the market. I only attach myself to continued education and sharing my results. According to Jim Murphy, my results appear to be incorrect half the time, but they always seem to help me make more money. So go figure. They must be right for me.
Nonetheless, a point of view that cannot stand up under sruitiny is not worth defending. I always learn something either way.
David John hall
|
|
Registered User
Joined: 1/1/2005
Posts: 2,645
|
David,
I made no remarks at all concerning the testing you did. I merely asked:
"Does anyone know how the opening price of SP-500 (or any index) is determined?"
You stated:
"According to Jim Murphy, my results appear to be incorrect half the time, but they always seem to help me make more money."
I do not recall having ever commented on your test results. I did one time make a statement to the effect that an increasing TSV Moving Average does not imply Share Accumulation as measured by TSV. But that is a fact that has nothing to do with me and is not a comment on your test results.
Thanks,
Jim Murphy
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
bustermu ...
I believe that it is call OPIC ... Opening Price Index Calculation ...
It is the first trade price for each component security ... and if the security has not yet traded ... it is the last traded price from the previous day ...
A litte searching on the above terms might yield more info ...
|
|
Registered User
Joined: 1/1/2005
Posts: 2,645
|
QUOTE (realitycheck) I believe that it is call OPIC ... Opening Price Index Calculation ...
realitycheck,
Thanks for your response.
I found this:
The OPIC is based on the first traded price of each constituent stock in the index. If a constituent stock does not trade, the last traded price from the previous trading day will be used.
which agrees with what you said.
That does not make sense to me. It means that the opening price cannot be determined until all of the constituent stocks have opened or the close.
This means that my impression of how the high and low are calulated are incorrect,
Maybe someone else can help us.
Thanks,
Jim Murphy
|
|
Worden Trainer
Joined: 10/7/2004
Posts: 65,138
|
bustermu,
I do not believe they wait until the Close of the current day to calculate the Open, but that they use the Opening Prices of the stocks that do trade "at the Open" and use the Close from the previous day in calculating the Official Index Open for stocks that do not trade "at the Open". I have no idea what sort of slush factor might be used to determine if a stock trades "at the Open".
The descriptions I have found so far on the internet are not detailed enough to say this for sure. I believe it is true because one of the criticisms I have found is that the Official Index Opens for Indexes will normally be "closer than they should be to the previous close" because a significant portion of the calculation will be done using the Close of the previous day. This criticism was made by those that thought this made the Official Open of an Index not appropriate for use in Candlestick Analysis.
I cannot provide references, but I'm sure you can find similar criticisms with a few internet searches. Your milage may vary on how to interpret the information found.
-Bruce
Personal Criteria Formulas
TC2000 Support Articles
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
OK .... back to the subject of this thread ....
I'm just a dumb ol' country boy from North Carolina .... who doesn't really understand all of this fancy, high-tech stuff ...
But ... I've lloked at a few charts ... like the Dow & S&P .... and a few indicators .... like the QQV and the T2118 ... and I've tried to pay attention to some them squiggly lines on the bottom of the screen ...
So ... can somebody tell me how where we are in the market right now ... is different from where we were on August 8, 2007 ?
|
|
Registered User
Joined: 1/28/2005
Posts: 6,049
|
"can somebody tell me how where we are in the market right now ... is different from where we were on August 8, 2007 ?"
------------------------------------------------------------------------------
We have the information that has happened since Aug 8.
While one can argue the solutions.
Abu Dhabi
The Fed
Sub-prime freeze
Were not on the table then.
Remember that sub-prime was discussed over a year ago
and is not exactly new cutting edge info.
It is also doubtful everyone has lost their home and is
running wild in the streets.
So the real question is: When does the market consider
it real? (like all bubbles there is the day of reckoning)
When does the market consider a solution (or solutions)
"the solution"?
As can be seen by recent volatility. The "smart" money
on Wallstreet has no idea.
Thanks
diceman
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
Thanks diceman for your response ...
I wasn't as clear as I should have been in my question ...
What I meant to ask was "technically" speaking ... how is our current position different from August 8 ?
Is something green that used to be red ?
Is something crossing up through something else ... that was crossing down through it before ?
Is the discombobulator gyrating ... when it was oscillating ?
That kind of thing ...
Thanks again ...
|
|
Registered User
Joined: 12/7/2004
Posts: 393
|
Reality, the answer might be that on Aug 8th the DOW was coming off an all time in Jul with a lower TSV than we saw in May. At the end of Nov the Dow may have formed a double bottom, or is possibly setting up for a head+shoulders top formation that was mentioned a day or two ago.
|
|
Registered User
Joined: 1/1/2005
Posts: 2,645
|
Since gaps, up openings, down openings, and the like are being discussed here for SP-500 and its proxy SPY, it may be well to point out that there are significant differences in such patterns for the two,
For example, for the 500 days ending on 09/24/07, there were 12 up openings for SP-500 and 267 up openings for SPY. There were 217 no changes for SP-500 and 12 no changes for SPY. The occasions when the two open in opposite directions may be of interest.
Thanks,
Jim Murphy
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
QUOTE (laphill) Reality, the answer might be that on Aug 8th the DOW was coming off an all time in Jul with a lower TSV than we saw in May. At the end of Nov the Dow may have formed a double bottom, or is possibly setting up for a head+shoulders top formation that was mentioned a day or two ago.
Thanks laphill ...
I guess you're getting down to the meat & potatos of what I'm taking about ....
For the sake of illustration ... let's look at the DJ-30 on a daily line chart ....
You mentioned the coming off of a double bottom .... and August 16 and November 26 certainly does show us that ...
Others argue that we had a double top ... July 19 and October 9 ...
But ... what seems to be inarguable ... is that we made two major tops with very little forward ground gained ....
In signaltap2's hourly charts ... the thing that made me feel that we had a pretty hard rally coming ... was that the index made two hard runs to the 55ema ... with very little lost ground between them ...
But back to the daily Dow ...
When we look at the July-August decline ... wenotice that a trendline neatly connects the tops on July 19, August 8, and August 24 ... another attempt was made on August 29 which failed briefly ... with the index breaking through on August 31 ...
Aside from the climax bottom ... this violation of the downtrending line seems like an obvious indication of a change in sentiment ...
Now then ... let's look at the most recent decline ...
If we connect the top made on October 9 ... with that of October 31 ... we see that our trendline would be met somewhere just shy of 13.5K ... but we also notice how out of kelter that trendline seems with that of the first decline ...
So ... for the sake of experimentation ... what if we were to discount that secondary peak made on October 31 ... and use the one from October 29 ?
Now ... we notice that we have a downtrending line nearly parallel to the first ... and that on Friday the market reached that downtrending line ....
In addition ... we can't really say that we have had a "capitulation bottom" on this decline ... right ?
As a matter of fact ... the volume on November 28 just doesn't seem to be commensurate with a move of 330 points ...
I can't help but wonder if this is not just indicating an abscence of sellers ... moreso than a hoard of buyers .... if fact ... on Friday ... we had nearly equal volume to that day ... and the index moved up 60 points ....
In the first decline ... the index clearly found support on the 200 ema/daily ... in the second ... we not only violated that level ... but remained below it for several days ...
I'm just thinking out loud here ... as I know all too well the ramifications of preconceived notions ...
But ... I can't help but wonder if the market is not in a fundmentally weaker postion now ... than it was in a similar looking postion on August 8 ....
Your thoughts ?
|
|
Registered User
Joined: 12/7/2004
Posts: 393
|
Reality, Yes, I believe the mkt is weaker now. If your trading on the long side your facing more risk IMO. This becomes apparent on a weekly chart zoom 4, Stoch 13/5/8 and TSV 18, with LinReg 55 on both indicators.
|
|
Registered User
Joined: 6/6/2005
Posts: 1,157
|
Hi reality,
Great question. I ran the chart back to August 8th and I think we're more like August 24 instead. Same place. Same move. Different outcome this time I believe. As noted by the weak follow through on Friday. If anything, this time I think the market may decline into the fed's rate cut. But, yes, we all know what forward looking statements can make us look like. lol
Here's what I'm talking about. Today's chart.
I'm really starting to like the shorter term RSI laterly and the trndlines it makes. Ever since rereading Welles Wilders book. But anyway...there's the chart.
Here's the 8th.
To me it appears much higher and bouncing off resistance, much like the first part of the most recent leg down. And RSI has not given a guy.
If I scroll forward to the 24th I get a nearly identical chart to the one we have today.
My main thought is that that is it really going to be the same bounce the same way?
I don't think so.
One other interesting thing I saw when i was looking to see where me might go to the downside is this chart which to me shows an interesting area of resistance.
If we don't clear that i think it's back to recent lows. If we do, I see the 13,500 area coming up.
If we close above that downtrend line then my analysis tells me then is the time to consider longs. Of course, these are all only my opinions. But I had fun giving them. Thanks!
David John Hall
|
|
Registered User
Joined: 4/18/2005
Posts: 4,090
|
And they were great to read! I love how clear and Methodical you are !.
|
|
Registered User
Joined: 4/18/2005
Posts: 4,090
|
Just a few thought I had. . . . . They may be unpopular. But there is a posibility that we are going to be range bound here?
 
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
QUOTE (davidjohnhall) If I scroll forward to the 24th I get a nearly identical chart to the one we have today.
Very true ...
And you make a quite compelling argument ...
However ... there is one element that I find extremely difficult to discount ...
And that is the climax bottom .... and reaction bounce the following day ... on nearly "dwarfing" volume ... on the daily chart ...
The bottom on the most recent decline ... was made on less than 60% of the volume of the first decline ....
Can we call that capitulation ?
Or was it merely a well known support level where the shorts decided to take profits ... and wait for a better day ?
And David ... thank you for the time for the time that you put in on very well thought out and composed analysis ...
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
QUOTE (davidjohnhall)
One other interesting thing I saw when i was looking to see where me might go to the downside is this chart which to me shows an interesting area of resistance.
Very interesting find David ....
I didn't see that ....
|
|
Registered User
Joined: 6/6/2005
Posts: 1,157
|
Hi Reality,
I agree. I don't think we'ver seen the capitulation seen during most bottoms. I'm still not sure where this thing is going. My guess is down. But guesses kill you in the market. (at least they do to me).
Thanks for the kind words Scott! There really is nothing better than this Board.
David John Hall
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
Along those lines ...
One thing that I used to notice ... in a time where, I believe, the market acted a bit more rationally ... was the method in which bottoms and tops were retested ....
I called them hard bottoms and soft bottoms ... and the same for tops ...
It would seem that you would fall quickly to a support level ... and the hoard would rush in to support it ... forming a hard bottom .... a rally would ensue ... and then over the next several days ... the index would "trickle" back down to that level ... or a level slightly lower ... again finding support ... which would in turn support a meaningful rally from that level ...
And I've noticed the same thing in tops ....
The shape of the second decline seems a bit steep though to qualify as a soft bottom .... as the "look" seems to have more to do with approach angle ...
Looking at a monthly line chart of the S&P 500 ... more illustrates what I'm talking about in the form of tops .... and, of course, if you were to invert it ... would be sort of what I'm thinking about in bottoms ...
Notice the difference in approach angle between the first and the second ... i.e the rate of change ...
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
As you look at that monthly line chart of the SP-500 ...
Notice how the 10 ema seemed to act as absolute support for the bull run that began in '94 ... and then absolute resistance for the bear beginning in 2000 .... and then support again for the bull beginning in '03 ....
Based on this ... where we are at seems to be a major inflection point ...
|
|
Registered User
Joined: 1/28/2005
Posts: 6,049
|
With all the talk of sell-offs and "extreme" volatility.
I took LW's Synthetic VIX indicator and applied it
the monthly DOW:
((MAXC12-L)/MAXC12)*100
(I changed it to 12 months to represent a year)
I also applied a 12 period exp mav to it to smooth
the noise.
If you zoom to view as much data as possible, we've
actually been in a period of low volatility.
Draw a horizontal trend line from the 12 mav and
you will see that this is typically a low area.
(you cant change the zoom or the line will re-scale)
I went back and looked at periods when the volatility
was this low and it was 1995,1965,1945.
That's interesting because of the stuff about years that
end in 5 looking the same. (our recent low was about
late2005)
Its also interesting to note there was a run-up in
volatility as the market topped in 2000.
Thanks
diceman
|
|
Registered User
Joined: 6/6/2005
Posts: 1,157
|
Hi Diceman,
That chart paints a very interesting picture. Looking at that chart of the dow, and the low vix reading, I honestly can't see why we shouldn't have a retrace back to the 11,700 to 12000 area before really taking off. At which time the market should be rampant with panic and bargains! But I might be getting overly optimistic. The synthetic vix is a great sentiment indicator.
|
|
Registered User
Joined: 4/18/2005
Posts: 4,090
|
Diceman. The above is a modification of
((((MAXC22-L)/MAXC22)*100)*-1)
right?
(the above is inverted..just easier to read for me that way)
I've just finished Connors "Advanced Trading strategies" and he talks allot about the VIX there. I'm curious what is the difference between the VIX and the Synthetic VIX?
Also I didn't get a clear idea of how he uses his VIX reversal system... anyone out there familiar with the various reversal strategies of VIX to explain it at least basically? I found his VIX reversal strategies prsuposed knowledge f the VIX and it's use in trading, so being new to VIX the show strategy seemd fairly ambiguous.
|
|
Registered User
Joined: 1/28/2005
Posts: 6,049
|
"Diceman. The above is a modification of
((((MAXC22-L)/MAXC22)*100)*-1)
right?"
-----------------------------------------------
Yes it is the original changed to 12 bars
instead of 22.
The real VIX is calculated synthetically thru
option volatility. Although it is a broad market
measure. It probably most accurately reflects
the market it is calculated on.
The LW VIX uses actual price data. The advantage
is it can be applied to any security. (that has close
and low data)
Thanks
diceman
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
QUOTE (davidjohnhall) Hi Diceman,
That chart paints a very interesting picture. Looking at that chart of the dow, and the low vix reading, I honestly can't see why we shouldn't have a retrace back to the 11,700 to 12000 area before really taking off. At which time the market should be rampant with panic and bargains! But I might be getting overly optimistic. The synthetic vix is a great sentiment indicator.
Well ... the good news is that we won't have to wait all that long to find out .... as the next 30 to 45 days should definitely tell the tale ...
Personally ... should I see a bar print below the 10 ema on the S&P monthly chart ... I'll really have no reason to believe that it is a short term phenomon ... as it hasn't been in the last decade and a half or so ...
I don't really see all that much pessimism concerning the market right now ... everyone seems to be thinking that it is just a short term pullback ... and now is "the time to buy" .... no mutual fund redemptions to speak of ... etc ...
Time will tell ....
|
|
Registered User
Joined: 1/28/2006
Posts: 291
|
If you will excuse my barging in here....perhaps T2102 will give you some idea of where you can expect consolidation chop going forward? I prefer the daily as my ratio indicators give a better idea of what is going on.
The answer as to why we won't fail the lows should be apparent to all here....the big boys are not through distributing yet.
I believe if you look at the chart from '98 to '01 you will note that the distribution there meant that T2102's fall into 2004 was not as steep as one would have anticipated. One might also infer that something was learnt there. In other words, the rate of distribution has been slowed so as not to give much forewarning of another break.
If one 'fib'ed the range from recent lows to 1210-1220 range, areas of consolichop would likely become more apparent? What say you?
Just for my edification, perhaps some of you might also explain why u believe the S&P the leading indicator for a market? I do not believe I have seen anything (technically or otherwise) that would lead me to the same conclusion. Perhaps Mr Murphy can weigh in? Interesting question he asked regarding "what a market open is based on"? Why, it is based on the singularity, as any good pyramid is.
Thanks in advance for your thoughtful inputs.
Ponder: The difference between "My god....it's full of stars!" and "Bogie at my 10 o'clock" is one letter.
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
awshucks ...
I'm really interested in your opinion ...
But ... other than being heavily laden in sarcasm ... I really couldn't make head nor tails out of your post ...
You think that the lows will hold ... which lows exactly ?
The market has to stay up because the big boys aren't through distributing yet ?
What does that mean exactly ... that all the large investors can totally divest without effecting market price ?
What do you find to be the "preferred" leading market indicator ?
|
|
Registered User
Joined: 6/6/2005
Posts: 1,157
|
Hi awshucks,
I think this topic was started because the original poster brought up gaps in the S&P 500. You will also note that the DJ-30 was discused which is (in my opinion) not as strong of a market representation. But that doesn't matter. We all use what we use. i think it might be slightly narrowsighted to think that one method, one indicator, one approach to the market is "correct" while another is "incorrect". I think you gave yourself the answer you're looking for with the "ponder" endnote you left us with.
Regazrding the "Fibbed" indicator, it has yet to breach the 38.2% retracement level while the market already has. To me that sugests a negative divergence if anything.
Plus, the cumulative aspect of the indicator does not appeal to me. Amazing, isn't it, that one trader could like an indicator while another finds it worthless. Thank God there are lots to chose from.
I much prefer the T2108, not because it's the best indicator or better than the one that you use, but because it works with my personality. As far as I am concerned, that's the only "noise" indicators help filter out.
And for our "edification" perhaps you might want to point out...nah, don't need you to point out anything. i get the most amazing insight and interaction and "pointing out" already from the other traders who communicate in a more personable way.
Thanks for sharing.
David John Hall
|
|
Registered User
Joined: 9/25/2007
Posts: 1,506
|
I've never gotten much out of the T2102 either ...
But perhaps that's because I'm missing something ...
As a modified advance/decline line (T2100) ... it seems to slightly exaserbate moves in either direction ...
And because of that amplification ... I'm not even sure how much good it is as a divergent indicator ...
The T2102 turned negative in '98 ... while the market continued higher until early 2000 ...
Perhaps what awshucks is trying to tell us ... is that this indicator must be negatively divergent for some extended period of time (years?) before the market can tank ....
But ... the Advance/Decline line did pretty much the same thing ...
|
|
Registered User
Joined: 1/28/2005
Posts: 6,049
|
davidjohnhall, realitycheck
I believe awshucks is talking about fibbing
the 1210-1220 level of the SP-500
(funny when he said we should ask Mr. Murphy
I thought he was talking about John Murphy)
--------------------------------------------------------------------
Which is the best leading indicator?
Obviously Bolton/Tremblay and the "ratio indicators"
Thanks
diceman
|
|
|
Guest-1 |