SPX-Gears

[Peterma]

OK, it's Sunday night, I'm thinking about stocks tomorrow, so what to do.

The often quoted consensus is to be extremely careful on the first day of the week, all the media hype over the weekend is usually reflected in the opening action.

So then, on spx a series on lower highs and lower lows on hr1 since May 10th, i.e. almost 2 weeks - thus momentum is on the sell side.

Hmmm, so I'm bearish, unless I'm some sort of bottom picker, and we all know that that's a bad habit.

So, why pick the spx, what's so special about it?

Now I'm thinking about risk and investors, so where to fly if I am looking for a quick buck.....

There's another chart saying something slightly different, let's see how it plays out tomorrow - on the right side.

 

[jack]

Downtrend, yes.. but until we experience some fear and panic we'll be stuck in the same rounded top consolidation range we've been in for what seems like eternity.

A catalyst is required. I was hoping that would be the eventual rate hike, but let's be real, that's long since priced in and dealt with...

My fear is breaking upward toward all time highs right as we get into summer... equity trading in the summer is slow enough, let alone with a perma-grind higher (...sucks the volatility right out.)

As for Monday, save for any shake up in Europe before the US open, this is the support zone I care about:
https://www.tradingview.com/x/sX0puCFL/

I'd love for a hard shot taken straight at it with a clean break to the downside, but generally speaking we're starting to look stronger for the week's start.

 

[Peterma]

Yeah, what I find of interest is that many guys were pointing to the H&S on the daily and I'd guess a few went short on the Fed talk. But look what happened when the line was breached.

The other chart of interest is the small caps, the USD2000 does a good job on risk guidance, the same H&S etc, but a noticeable difference since the Fed, there are signs of wanting to go North, will be an interesting week, maybe the beginning of another trip to the top.

 

[shopster]

wall load to the fld unload.

s

 

[Peterma]

Many thks Shop.

Well seems the small caps were indeed showing that there is a reasonable thirst for some risk, btw if a learner then it's not a good idea to sell USD/JPY if you sense risk-on coming into the market.

Another btw, it's a very complicated process whereby the US2000 can be a herald of risk, you need to read many books, do a lot of research and talk to may gurus.

Then again maybe just figure, you have money in your pocket, you want some decent return, you figure everything is rosy in the garden, so why would you go out and buy old dull and safe large caps with their lower, more predictable returns.

I'm diverging, back to the charts, I didn't post the 2000 chart - so here it was at the close yesterday (d1), with the same trend line as the spx - see the difference in the bar after the arrow, see also that the high of yesterday breached the trend line whereas the spx didn't, it was that simple - yeah maybe too simple.

 

[shopster]

all boats rise.

just pick one and load....

s

 

[Peterma]

Shop is making an important point - in stocks they all rise and fall, any divergence that may occur will be short lived.

I'm a day trader, so exit the long this morning, figured that Asian markets would pull the futures up and maximize profit, now will wait for later.

 

[shopster]

spooze hurst exit door

s

 

[Peterma]

Shop's post caused further thought, I was checking out some Hurst stuff, then I remembered that he posted a link to a Dante webinar.

Aside from Tom's sometimes colourful use of words his twitter is a good follow, in the webinar around 14 mins there is specific mention of the setup that I referred to in the charts above - where the up arrow was - note his emphasis on context, mine was the reaction to the Fed.

http://fxgears.com/forum/index.php/topic,596.msg15569.html#msg15569

 

[Peterma]

Week nearly over, all the action north contained largely in one day, I've stayed out since .

So what's my problem, why am I not joining in again, all the H&S sellers have given up, the neck line proved too much, price has just stalled on it's merry way to another new high, get in quick ....FOMO

Here's what's wrong - the buy was based on a guy in a white suit called Risk arriving into town, price behaviour and the USD2000 gave some hints of his impending arrival so I'm asking myself whether he is still around.

Dante is a Bund trader, wonder does he ever trade the UK or US10yr.

 

[nogo]

Week nearly over, all the action north contained largely in one day, I've stayed out since .

So what's my problem, why am I not joining in again, all the H&S sellers have given up, the neck line proved too much, price has just stalled on it's merry way to another new high, get in quick ....FOMO

Here's what's wrong - the buy was based on a guy in a white suit called Risk arriving into town, price behaviour and the USD2000 gave some hints of his impending arrival so I'm asking myself whether he is still around.

Dante is a Bund trader, wonder does he ever trade the UK or US10yr.

really shouldn't care about what other people are doing. it's all in your head.

 

[Peterma]

Exactament - get into the collective head, the market is merely a bunch of thinking heads.

Ah well, next time I'll post a chart, in the meantime watch the US10yr hr1 200sma - just to see what the thinking heads are doing - might tell you more about the whereabouts of the guy in the white suit

 

[Peterma]

Quick update - mindful of Shop's post on Gurus and their wisdom.

I mentioned Dante because he trades bonds, the US10yr is often a good risk barometer, especially when there is a kind of make your mind up time with regard to risk and the Spx.

When I posted the 10yr was just after hitting the 200sma hard, seems there were a few bond traders watching that level.

By coincidence the level was also the weekly high and what is often referred to as recent resistance (hr1).

So the question in my mind was whether the bond traders would take it yet higher thus signalling risk off (white suit departure) or would price capitulate.

In the event the bond traders gave up and the USD2000 went higher.

What did I do as a seasoned guru, mindful of all the physco stuff - I went short the ftse, still am, crazy or what?

Well not really, the UK10yr is slightly different with the 200sma - mind you I am not that hopeful come Monday, maybe ok during UK (sorry European) session, but they tell me that Mondays are a good day to buy Spx, then again it's end of month time.

Anyways - here is the promised chart - all hindsight nonsense now, but I loved the way nogo drew it out.

Btw, think about this - you are trying to second guess the next move on spx, so you are using us10yr, it has reached up to resistance (which imo caused the stall on spx rise), so is there any way we could second guess?

First chart of US10yr 12 hours after replying to nogo - yellow is 200sma hr1 us10yr - price has gone to the upside, but still a double top, but check shop's stuff at the bottom

Second chart is the close - y'all know what happened on stocks by the close.

- I don't need to draw out the divergence.

Btw, as Williams says, this is a thinking mans' (and woman's) game, so the intention of my posts is to stimulate thought, as much my own thought as others' - I truly believe that human intelligence still has an edge on computers and their algos

 

[Peterma]

Almost forgot - USD/JPY - I mentioned it last week, it fits into the grand scheme of risk as most of you know.

So when you see shop's divergence I have hidden another (red) line at the bottom. It is merely a representation of that cross relevant to what is happening.

Here too I will not bother with divergence lines.

Then checking the actual cross, (which is what I do when I see a heads up), same story, one hour later:

(remember buy Usd, sell Jpy when risk is in town)

Enough yakking for now.

 

[jack]

Yeah, what I find of interest is that many guys were pointing to the H&S on the daily and I'd guess a few went short on the Fed talk. But look what happened when the line was breached.

Pattern recognition is a cognitive bias.. Humans are great at seeing what we want to see in the charts. This, along with confirmation bias, is compounded when people "predict" a pattern before it even forms... in the end, that's just trading noise and ego.

Anyhoo...

That support zone I pointed out held fine. After the fed talk I took a relatively small long volatility bet that expires in two weeks... Just to scratch the itch as they say.

 

[Peterma]

Lol, that same itch has got me into bother more than once.

Funny enough that you mention the notion of predicting, I'd say that possibly therein lies the problem with charts.

I remember back awhile learning first of a programme called 'autochartist', this seemed like the holy grail, was quite expensive but was using state of the art software to 'recognize' chart patterns and therefore to 'alert' the subscriber to the likely outcome of the pattern.

Nowadays quite a few 'brokers' include this programme free of charge, now there is a thought.

 

[jack]

Lol, that same itch has got me into bother more than once.

Funny enough that you mention the notion of predicting, I'd say that possibly therein lies the problem with charts.

I remember back awhile learning first of a programme called 'autochartist', this seemed like the holy grail, was quite expensive but was using state of the art software to 'recognize' chart patterns and therefore to 'alert' the subscriber to the likely outcome of the pattern.

Nowadays quite a few 'brokers' include this programme free of charge, now there is a thought.

Hence the 'relatively small' bet using defined risk. I risk far, far more intraday in equities than I put on this two week bet.

Autochartist's goal isn't to give decent calls and make traders rich. Their goal is helping brokers (who are their biggest client) with trader retention and monthly volume. A broker providing sponsored access to Autochartist is no different than hiring a 'blogger' / analyst to post trade setups (such as Todd Gordon's old Gain Capital days.)

I could go on about the pitfalls of Autochartist but I think you see where I'm going with this. Avoid it. Think for yourself.

 

[Peterma]

Good chance that the 2 week bet will play out well.

Your last three words, music seldom played in the market these days.

Look forward to the upcoming week, hope the UK guys get the jitters early tomorrow,

 

[Peterma]

I should have explained why short the ftse.

First the UK10yr, it had hit bottom 25th, correlating it with Usd/Jpy it was reasonable to conclude that IF it were to create a dbl bottom then it would be very likely that there would be divergence - in a sense the selling on the bond appeared contrived.

Same divergence with US bonds.

That was the guess part, the hard part was the ftse itself, it created a dbl top 26th, divergence already in action with all bonds since 25th, so reasonable to conclude that risk momentum coming to a close, the second push up therefore contrived.

Anyways that's it - nothing special, dd very limited, possible to get stopped out early this morning, I would have gone back in if that had happened because the divergence was still active.

 

[Peterma]

Ftse short hit TP - why didn't I place that down at the weekly low red line, instead I had it at the yellow line?

The quick answer is just luck I suppose - I usually don't look for the entire tech move, never bothers to leave something on the table.

Little rest now for a while .... but I'll be baaack.