Registered User
Joined: 10/7/2004
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If Tuesday's and Wed's EOD data each show a successively higher LOD, then keep your stops tight on any long positions. Thursday's drop could be precipitous.
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 Gold Customer
Joined: 4/10/2006
Posts: 954
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I know you may have been concentrating on something and hurriedly typed this, (as I often do) but if you could Clarify? or nullify the comment. Thanks.
Tue Wed End Of Day successive higher Low Of Day? On S&P500 ?
What is Thur? is there an event or is this a count from previous data.
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Registered User
Joined: 10/7/2004
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I'm sorry, I forgot to say SP-500 or SPY (both look about the same in this context). I'm not sure how better to rephrase the rest of it, today's LOD was higher than Monday's LOD and if Wed's LOD is higher than today's LOD then I'd watch Thur very carefully if you have long positions. No particular event, just chart patterns.
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Registered User
Joined: 3/8/2010
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So since Wednesday's LOD was slightly lower than Tuesday's LOD does this have a similar meaning or???
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Registered User
Joined: 10/7/2004
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It doesn't look as foreboding as I first feared but, imho, we're not even close to being out of the woods. Not a call to panic, just thinking to be sure. Always remember, and we've said this many times around here, we CAN trade WITHOUT a computer and WITHOUT software and WITHOUT a plan and WITHOUT money management and WITHOUT a lot of things; but you CANNOT trade WITHOUT capital. Period. So protect it.
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Registered User
Joined: 11/7/2009
Posts: 14
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It seems like you called (at least initially anyway) today's (Thursday's) fall pretty accurately. The market started over 100pts down and grinded it's way back into positive territory. With that said, how did you predict, on MONDAY what the market was going to do on Thursday?
What time frame are do you generally work on to see chart patterns that are so (seemingly) clear and predictive?
Thanks
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Registered User
Joined: 10/7/2004
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The anticipated pattern broke down as 4/20 was a much stronger day. It looks like they're finding more ways to prop up the market. We'll take what they give us, I guess. Steppingstoneent, I typically use daily, and this is just a pattern I've seen before. I'll try to explain when I have more time if you're interested.
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Registered User
Joined: 3/8/2010
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I am interested to hear when you have time as I am sure many others are.
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Registered User
Joined: 10/7/2004
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OK, this set up is looking even more precarious. If Thur's and Fri's lows gradually climb higher than each previous day's and, if Fri's high is below the LR30 but close to it, watch for Monday to take a serious dive.
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Registered User
Joined: 2/21/2007
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always check your 3 day charts. Mr. Worden brought that to everyone's attention with his trend exit method.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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A doji or spinning top tomorrow with a high that does not exceed the LR30 and a LOD higher than today's LOD, for me, will be a great reason to tighten my stops on any long positions I have. Or just get out of them altogether before market close. Monday could be nasty in such a case. And, trust me, nothing would make me happier than to be wrong.
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Registered User
Joined: 10/7/2004
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Well, prices tried to climb up against an LR30 that was coming down like a bat to swat them. But this time they couldn't find any more ways to prop things up. The artificial fundamentals ran out for now. The market was just tired and away we went. So, where do we go from here? I'm suspecting the Nasdaq may find support around 2200. But if it drops through that, the next support I see is just over 2000. Too scary to talk about after that. Let's just say that, for the time being, I'll be loading up on FAZ.
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Registered User
Joined: 10/7/2004
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Keep an eye on VIX. Wow! It is in a powerful looking pattern right now. Monday should be another boost for VIX. But it might also be a blow off top (temporary). If it becomes detached from the UBB20 with gusto, then there may be a few days of some quick buying opportunities. But, my goodness, get in and get out fast until we see how high VIX plans to go. Overall, I'd say keep your powder dry and be ready to buy when the the next March of 09 comes around. We might triple some of our money once again. In the meantime, triple your money with FAZ.
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Registered User
Joined: 3/21/2006
Posts: 4,308
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How are you Tobydad?
Another good gauge that might help folks, that I use for swing trading (not Day trading), is the 20day sma.
Trade long if the 45 sma is moving up or positive. And price is above the 20day sma.
Trade short when the 45day sma turns down or south and price is bellow the 20day sma.
You will notice that the 45day sma is just now turning and also that during the January correction that the 45day sma stayed flat. (Not good for longs or shorts.
This is just a guide and of course some good traders will make money in any condition...
Apsll.
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Registered User
Joined: 3/21/2006
Posts: 4,308
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This trend line on the monthly charts goes all the way back to 1962
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Interesting article just read stating that more investors than ever are now placing GTC stop loss orders on their positions. Where, once, they just trusted that the market would always go eventually up, they, now, are locking in profits and being willing to be stopped out. The article poses the question and even postulates a position that the deep move in the market the other day was, in part, designed to take out those stop losses. Hmmm, the plot thickens.
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Registered User
Joined: 2/21/2007
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[QUOTE=tobydad] they just trusted that the market would always go eventually up
who'd they trust? The Big O administration? Can't wait to see the outcome. I already got my check made out to the " GREATER SOCIETY BY "O" , BIGGER AND BETTER THAN LBJ'S GREAT SOCIETY" Got to keep on moving up.
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Registered User
Joined: 10/7/2004
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Get ready for some ugly downside. SPY 106 or so. And let's hope that holds.
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Registered User
Joined: 1/12/2009
Posts: 235
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TD, what makes you come to this conclusion?
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Registered User
Joined: 10/7/2004
Posts: 2,181
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The SP-500 chart is an even better example; a very hard down day (historically hard down day, in fact) below the LR30 on 5/06, 3 days following with successively higher LOD's with the 3rd day rising to touch a descending LR30 (like a baseball bat coming down on an ascending tennis ball) usually means a serious drop. As well, look at the action of the last two days, a strong up day followed by a doji of sorts. Sure looks like downward action ahead to me.
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Registered User
Joined: 2/13/2005
Posts: 368
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I like your analysis TD, especially the LR30 baseball bat analogy.
Anyone want a beer bet?? Which blows up first, the Euro or China??
My forecast : Euro blows up this Summer, then China, then the realization that China can't buy our debt because they went kerblooey, and then we go kerblooey. Gold goes to $4500, Dems blown out of the water in November, and then Obama loses in landslide 2012. I'm all cash right now besides 20% GLD. My "BUY" gates are 25% in at DJ-30 = 7500, 25% at 6000, and all in at DJ-30 @ 4500.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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I don't drink beer but I'll take the bet; Euro walking a thin line right now (who isn't?!). Israel becomes natural resources capital of the world, Levant Basin yields enough oil and natural gas to supply US, Israel and Europe for the next 100 years, Dead Sea already has so much mineral wealth that half the industrialized nations of the world are secretly drooling. China becomes desperate and attempts to take it by force. Big nuclear encounter. Not a pretty sight. I'm buying gold, lithium, and rapidly accumulating a sizeable position in FAZ right now. 1000 shares in FAZ + FAZ at late 2008 levels = millionaire.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Oops, forgot, 10,000 shares ZN.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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This not said to prove anything, it will just be interesting for us all to track and observe, as of now (11:35pm EST), markets are down.
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Registered User
Joined: 2/13/2005
Posts: 368
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QUOTE (tobydad) I don't drink beer but I'll take the bet; Euro walking a thin line right now (who isn't?!). Israel becomes natural resources capital of the world, Levant Basin yields enough oil and natural gas to supply US, Israel and Europe for the next 100 years, Dead Sea already has so much mineral wealth that half the industrialized nations of the world are secretly drooling. China becomes desperate and attempts to take it by force. Big nuclear encounter. Not a pretty sight. I'm buying gold, lithium, and rapidly accumulating a sizeable position in FAZ right now. 1000 shares in FAZ + FAZ at late 2008 levels = millionaire.
Wow, I wasn't aware of the Israel/mineral situation, I'll have to do some research today. I agree with your nuclear exchange comment but I figured my post above was doom & gloom enough. I think it'll be Russia that starts the nuke war.
As for the FAZ call, I should have thought of that too. A few thousand shares will be worth the bet. Cheers.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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" China becomes desperate and attempts to take it by force. Big nuclear encounter. Not a pretty sight."
==========================================================
After nuclear strike basic materials sector should do well.
Thanks
diceman
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Registered User
Joined: 6/15/2008
Posts: 1,356
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why buy thousands of FAZ shares? just get a handfull of JAN '12 calls for couple bucks.
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Registered User
Joined: 12/31/2005
Posts: 2,499
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QUOTE (tobydad) Interesting article just read stating that more investors than ever are now placing GTC stop loss orders on their positions. Where, once, they just trusted that the market would always go eventually up, they, now, are locking in profits and being willing to be stopped out. The article poses the question and even postulates a position that the deep move in the market the other day was, in part, designed to take out those stop losses. Hmmm, the plot thickens.
If so, then the stop loss becomes a capture loss.
When backtesting fixed hold period strategies, the use of stop loss undermines the performance of the strategy for viable strategies. Any stop loss, even a 20% stop loss will on average decrease performance. That is, without any stoploss the sum of the recoveries above the stop loss exceeds the sum of the losses below the stop loss. So setting a stop loss locks in the loss. Without the stop loss some may tank in a big way, but the ones that recover, the recovered amount exceeds the amount of the losses on the ones that don't.
To clarify, by "viable strategy" I mean if statistically the strategy works and the average return is positive for a large sample, then on average the approach is positive, so don't use a stop loss to lock in losses. The trend of the stratgey is positive so don't let the volatility combined with a stop loss lock in the losses.
Clearly a "non-vaible strategy" would benefit from a stop loss, as capturing a x% loss via a stop loss is better than having an x+y% loss resulting from no stop.
Trading without a net though is easier said than done, especially given the recent volatility.
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Registered User
Joined: 10/7/2004
Posts: 426
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Jas, you bring up a good point. I have found that using a stoploss will hamper profits in a normal market and gets worse in a volatile market. I always use an exit system to take me out of a stock.
To prove the point. Here is a backtest of a 10 and 18 simple moving average crossover system using the stocks from the S&P 500 from 1/1/2010 until 5/12/2010. Keep in mind that commission or slippage is not used.
No StopLoss = Profit 5.19%
5% StopLoss = Profit 3.32%
10% StopLoss = Profit 4.64%
15% StopLoss = Profit 4.91%
20% StopLoss = Profit 5.01%
The tighter the StopLoss, the smaller the Profits
Actually, using a slight StopProfit works out better
No StopProfit = Profit 5.19%
5% StopProfit = Profit 5.70%
10% StopProfit = Profit 3.82%
15% StopProfit = Profit 3.96%
20% StopProfit = Profit 4.26%
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Registered User
Joined: 10/7/2004
Posts: 2,181
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jas, booker, Great contributions! thanks. Booker, could you comment a little further for any who might need it as to what you are referring when you say "Stop Profit"? thanks
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Registered User
Joined: 10/7/2004
Posts: 426
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Sure thing Tobydad, I'm sure most people have already figured it out. "StopProfit" is part of a function of thebacktesting software that I use that is designed to simulate stop orders placed at the exchange or simulated by thebrokerage and can be defined in percent, points, or percent of profit(risk). It is used just like it sounds. A profit target stop. Whereas most people are familar with a stop loss for max pain, stop profit can be a breath of fresh air in these volatile times.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Critical points: SPY = 114.90, COMPQX = 2345.49, DJ-30 = 10771.68, SP-500 = 1156.13, QQQQ = 47.19
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Registered User
Joined: 6/6/2005
Posts: 1,157
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the use of stop loss undermines the performance of the strategy for viable strategies. Any stop loss, even a 20% stop loss will on average decrease performance. That is, without any stoploss the sum of the recoveries above the stop loss exceeds the sum of the losses below the stop loss. So setting a stop loss locks in the loss. Without the stop loss some may tank in a big way, but the ones that recover, the recovered amount exceeds the amount of the losses on the ones that don't.
I have found exactly the same thing. But as Jas states, trading without a net is easier said than done. But easier said than done does not equal impossible. :)
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Registered User
Joined: 10/7/2004
Posts: 2,181
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I believe the news coming out, especially the nightly Worden report from a few days ago demonstrates, more than ever now, that the conditional order has become one of the critical tools if you are not able to sit and watch the market daily.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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9:03am: S&P down 7.20; Nasdaq down 13.25; Dow down 97. Should be interesting. It would be good to get a nice rinse out at this point.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Next critical areas: SPY 104.99, COMPQX 2185.74, DJ-30 9869.61, SP-500 1065.78
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Registered User
Joined: 10/7/2004
Posts: 2,181
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I have no idea if this is accurate but I just read that Waddell & Reed sold a large number of e-mini's and it is thought that this was a major contribution to the landslide sell-off recently. As Mr. Worden has oft pointed out, the markets were just looking for excuses to drop. This cannot be fully blamed on computers as the software is only responding to parameters entered by humans. People are tightening up their safeguards, buying less and selling more. What else would we have expected once we see a fund manager selling off 75,000 e-mini contracts in 20 minutes? This is a serious indication of sentiment which one will ignore to his own hurt.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Futures as of 11:25pm est: SP-500 down 14, Naz down 23, Dow down 127; Nikkei down 2%, Hang Seng down 2.5%, FTSE down 3%, DAX down 3%. Let's hope this is just a good, healthy rinse out. Probably is. But please watch the critical points I have posted (or whatever level you choose to watch). Just don't assume a bounce is coming right away. If it does, great! ride it. Just don't assume. Force the markets to persuade you. Remember, no capital, no trades. Don't lose your one and only absolutely essential tool.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Lower from here. New critical points is LOD for 5/17 for most indices. I suspect SPY 106 to be the basement with possible stretches down to 104 or a little lower. Let's hope we hold from there or it gets very ugly.
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Registered User
Joined: 6/15/2008
Posts: 1,356
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ApsII, very interesting chart on the SP500. actually you can pull that trendline back all the way to 1937.
bought some FAZ Jan '12 20 calls on the 12th for about $4'ish. now up over $6.00 ! in 6 days. 600somewhat days to go. 50% every 6 days. hehehe reserve my oceanfront mansion.
thanks for the tips guys.
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