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Objective evidence
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Objective evidence

by ScottJuly 9, 2015

For months the stock market has fucked us all around. It’s been boring, difficult to trade, and frankly its worn me out. Evidence is accumulating now, and it’s time to examine it in detail. We may be coming to the end of one of the longest running, most persistent, strongest bull markets in history. Rather than read the crap about Greece and China to death until we confirm our own pre-existing biases, let us look carefully at the character of the current stock bull market, and objectively examine to ask the question “is it intact?”

Exhibit A – this showed all the signs of a strong long running bull market right from the get go. A strong move to kick it off, every pullback being bought, single bar pullbacks. Volatility steadily decreasing, which is a sign of a move with legs.

exhibit a

Objectively what has happened is that volatility has become historically low, while the bull market has weakened. This is a necessary precondition for change of trend. Statistically, overwhelmingly low volatility bull markets end in only two ways

Way 1) Blow off top – think 1999

Way 2) With historically low volatility, a choppy topping process, and gradually falling off the plate, led by historic currency and bond movements. Think 2008

Objectively, in my opinion, for the FIRST TIME IN YEARS, we can rule out number 1)

exhibit b

 

By definition we are closer to the end than the beginning of the bull. Maybe not right here, right now, but somewhere in the vicinity of it give or take 6 months. Winter is coming.

Now lets examine theĀ weekly chart. Note the failed retest of the highs at that low volatility extreme is very bearish.

exhibit c

Lastly, lets look at the daily chart. I’m going to use the ES index futures here

exhibit D

So at this point what do we have? We have historically MASSIVE upmoves and downmoves, giant gaps, puking and shitting all over my nice clean charts.

Another way of saying that is that “market type has changed” or “this is what a high volatility bear market looks like”

What do we expect in high volatility bear markets? Massive counter trend moves lasting only a day or two, big gaps, everything we are seeing now. And we have a daily setup. Get short on breach of the daily low, stop at the daily high.

Scott Phillips


About The Author
Scott
  • http://www.ProfitFromPatterns.com/ Ivan K

    A game of probabilities.

    Given the ‘outlier’ size of the range / s basis daily above … (translation … ‘large’ distance between Entry and ISL levels) … hence just a 1R positive return is also a ‘large’ distance away … hmmm.

    Not all lobsters are created equal … (perhaps) there are sweeter ones out there to partake of … irrespective of the outcome of this 1 of next xyz opportunities … a game of probabilities it is.

  • HeadNShoulder

    Did…the futures just puke to the….. upside?

  • http://evilspeculator.com molecool

    Indeed. But that doesn’t disqualify what Scott is outlining here. It’s normal to see huge swings during a topping pattern – it’s something I’ve warned about in the past few weeks.

  • http://evilspeculator.com molecool

    If I hear the word Greece one more time I think I’m going to throw up.

  • hellbent

    Just think of Olivia Newton John

    Going to have that song in my head all day now šŸ˜‰

  • HeadNShoulder

    that damn Diana Igropoulou is creating issue again and again to fkup all the stops.

  • hellbent

    Cheap seats going on the AUDNZD bus

  • Skynard

    Nice, were have some finatical gap filling exercising going on for sure. Totally agree, have placed stop sell orders now if we fall below todays low. Some shit going on, have no idea what it is but have protected my trades.

  • Skynard

    What makes you think we do not see a blow off this time?

  • Skynard

    Hehehe, nice thing to not even watch any of the crap goingon. Truly have no idea what is transpiring and do not care. You are a product of your environment, enough said……

  • Scott Phillips

    Could easily happen, and if it does happen it is most likely to happen here. That would by definition be a low probability outcome.

    Statistically what happens most often is that after historic low volatility we see an increase in volatility in the direction the market is choosing, either up or down. So far, objectively we are seeing an increase in volatility in combination with a downside break. That is bearish, unequivocally.

    Objectively if we saw a blow off it would have been increasing volatility not decreasing volatility. Look at moves on any timeframe from 60m. Find a low volatility melt up in any market, look at what happens after historic low volatility, and look at how often, and what conditions are necessary for a blow off top after that.

    You don’t have to (and shouldn’t) take my word for it. Just pull up some charts and look for yourself :)

  • Skynard

    Have no problem taking this short if and when it presents itself:) You know me!

  • Skynard

    Cool, thanks for the info. Will have a look.

  • Scott Phillips

    Note I’m not making predictions here. This is still entirely consistent with a high volatility bear move, massive shock rips to the upside, extremely difficult to trade. Short term traders getting ass-clowned.

    If the setup breaks to the downside, it is even higher probability now, since bulls will have been suckered in on news. If it does not trigger, no harm no foul

  • Scott Phillips

    :) You could base a whole system around this. Low volatility melt up, then historic low volatility, then choose direction of breakout.

  • Scott Phillips

    In higher volatility moves (like this one) wider stops are optimal. In this instance 2R would be 1978. Shown on the weekly chart it doesn’t look out of the question by any means

  • Skynard

    Lol, prefer wide stops as well. Many here could not handle that one:)

  • Scott Phillips

    Yes most definitely :)

  • Skynard

    AUD on the move:)

  • amokta

    Greece is the word :-)
    Anyway lets see if Godot finally shows up!

  • Skynard

    Chart

  • Skynard

    Weaker dollar could also drive this tape higher. Would prefer to see SPX 2100 gap filled.

  • Skynard

    DX 96 test coming

  • wandering196

    they are coming out off the woodwork hello there

  • Skynard

    Whenever discussion related to short entries it seems:)

  • Skynard

    Profit taking /NKD @ 20000, now short

  • Skynard

    Chart

  • wandering196

    I shorted with the best of them, I shorted until I was short of cash:)

  • Skynard

    Lol, haven’t we all:)

  • Skynard

    This is where we get suspecious, dollar tanking and AUD does not budge.

  • newbfxtrader

    Gonna be a bit of to and fro but we should fill the gap at some point. Then I wold look on the other side.

  • newbfxtrader

    The yen pairs could give you places of resistance/support….

  • Skynard

    Looks like bulls are going to try and put in a higher high:)

  • http://evilspeculator.com molecool

    I don’t think there are any bulls or bears left here – just the bots running stops.

  • Skynard

    Hehehe, go bucky:) Some crazy price action, we may get that blow off as participants should tag along.

  • http://evilspeculator.com molecool

    I was one day too early there.

  • http://evilspeculator.com molecool

    Greece just re-learned an essential lesson: The banksters always win.

  • Skynard

    Rinse and repeat, just a means to get everyone short again. We shall see how it plays out.

  • http://evilspeculator.com molecool

    Democracy vs. Creditors = 0:6

  • Skynard

    We are buying /SB back now

  • Skynard

    That sounds like a good approach. Is this how Mole’s systems are based?

  • newbfxtrader

    If you are not at the table You are dinner…

  • BKXtoZERO

    You said you didn’t want to hear that word again…………….

  • BKXtoZERO

    shouldn’t gold/silver be doing more with dollar reversal? thanks…

  • Skynard

    Metals have been under allot of heat. Theoretically yes, if the dollar truely corrects commodities in general are a buy. Hammer on most everything at the momment.

  • Skynard

    This is actually a tough call today, if we are in a W2 it is in our interest to get short. We may also have a W3, WTF.

  • Skynard

    After reviewing the Asian market it looks bearish.

  • HeadNShoulder

    Did you just remove “china” from your asian list since that country’s stock market is buggy

  • Skynard

    Hang Seng looks to have another leg down. These bulls are under allot of pressure at the moment, you may see a major FN move today. They need to clear SPX 2080!

  • HeadNShoulder

    Only 45% of the halted stocks on china market has opened for trade. Since they have limit up/down at +-10% take for example CSI-300 futures July contract has traded +10%, +9.36% (hit +10% intraday though) consecutively two days in a row. The PPT team is fking short sellers atm by limiting the number of short contracts to be traded (wtf) and swallowed all the bids on July contract then shorted the August contract to widen the loss of rolling over those contracts. The short sellers have to buy back the stocks from cash market. This is Asia’s very uniqued market spartans.

  • SirDagonet

    ha….

  • Skynard

    Wow, that is the FN MM’s giving the shaft to both sides. Amazing!

  • Skynard

    AUD backtest, FN buying more

  • Skynard

    VIX smash em up:)

  • Skynard

    See if the bulls can hold these FN gains is the big question.

  • ridingwaves

    Thanks MM’s that bounce off the 3400 area the second time just made me honey money…

  • ridingwaves

    16 and 17.25 area are acting as a backboard for Vix on 60 min….scalp city

  • Skynard

    Big gappers in Euro zone!

  • Skynard

    If 2060 does not hold this time around, getting FN short Moving stops in profit @ 2059

  • http://evilspeculator.com molecool

    You guys may want to see this…

    ..

  • Skynard

    Liking a W3 here after reviewing my charts. It just looks more attractive:) ZL is bullish as hell, gap support needs to be held here.

  • Billabong

    Looks like selling into an upside move across the board … bonds are talking loud and clear.

  • Skynard

    ?? Bonds are down

  • HeadNShoulder

    hourly looks “heavy” to the downside (again, kindly correct me if I am wrong. on 5min, the buyers seem dimminishing, yet no strong sellers yet.

  • Skynard

    2060 hardknock.

  • HeadNShoulder

    Market unchange! Nice.

  • Skynard

    /DX at res and about to embark on a nice move down from here.

  • Skynard

    What’s your take?

  • Skynard

    Rut Roe

  • http://evilspeculator.com molecool

    There she goes…

  • http://evilspeculator.com molecool

    A bit late now. When I posted it I was a bit taken by the lack of participation. But then again only a few players are really on the right side of the trade at this point. So I think this probably drives higher all day. Once it breaches 2080+ we’ll see a massive squeeze.

  • Skynard

    Sweet!

  • kim

    AUDNZD long might break through, check on hourly

  • http://evilspeculator.com molecool

    IF!

  • BKXtoZERO

    Just an observation here, not technical but the bulls (banks whoever) have met every challenge head on in rally mode so I also expected this but was careful. No matter what the challenge over the years I always see them go in strong.

  • Skynard

    Already looks like a proper wave to be:)

  • Skynard

    If so, we should not see any flopping around. Moon shoot! 2070 test and no weakness to be seen. Then would take stock:)

  • BKXtoZERO

    sitting in lots of dry powder thanks to you, Mole, the zero, and rats.

  • Skynard

    WTF, get it wet:)

  • http://evilspeculator.com molecool

    Don’t drag people into trades they are not comfortable with.

  • Skynard

    It is a joke dude:)

  • BKXtoZERO

    I would but I have T+3 limitations and waiting on credit for other moves. It is a self managed 401K, not a trading account. I blew that up. I would be scalping XIV today from the moment I got up if I could.

  • BKXtoZERO

    no one has to listen. I don’t. I went against this board many times.

  • http://evilspeculator.com molecool

    That may not be clear. I don’t want the kid to try to impress you.

  • http://evilspeculator.com molecool

    Good.

  • Skynard

    Hehehe, right! Spent time over at the Slope a Dope?

  • BKXtoZERO

    I am 50! not that impressionable any more but thanks dad!

  • http://evilspeculator.com molecool

    As I said, kiddo… šŸ˜‰

  • Skynard

    Ok, ya there is a waiting period for funds to be credited. Will be riding this bitch out:)

  • Skynard

    Hehehe,

  • Skynard

    Would have to say that most on this board are around that are on avg.

  • BKXtoZERO

    BTW. I have a portion credited but if I use it to scalp long, then I can’t short a little at EOD which was my plan depending on how it looks but thanks.

  • HeadNShoulder

    I just noticed on this pic, there was no blue downward arrow printed on the 1st 5min bar. However, on the latest ZL pic, there was a blue downward arrow now printed on it. What’s going on?

  • BKXtoZERO

    no elsewhere…………

  • HeadNShoulder

    Tape feels heavy thanks to Yellenation.

  • Skynard

    Trying to bid up /DX, next move is a biggie:)

  • HeadNShoulder

    Still within 5min bull flag pattern unless SPY206.90 is revisited

  • Skynard

    Absolutely, call that a bull flag as well.

  • Billabong

    My hat’s off to you. I have buy signals all over the equities side including YM / ES / NQ. Long bond has a sell signal.

  • Skynard

    That was 2 of 3, next up………………Have a good w/e!

  • BKXtoZERO

    as I said, you need a robe, sandals, a staff, a mountain and a burning bush to go with your brass balls and tenacity.

  • Skynard

    Cheers, much to humble for that position:) Cuss to much also

  • Scott Phillips

    You need to stop this madness right the fuck now :) With respect you have not got the skills to be trading for real money yet, and there is 100% chance of you fucking it up. Think about life without a retirement fund!

    Stop. Build a system. Trade it small. Don’t wreck your future just because trading looks easier than it is :-)

  • Scott Phillips

    Nope, but its something I figured out from analyzing losing trades in Gabriels short term systems :)

  • Scott Phillips

    Never triggered, so irrelevant :)

  • HeadNShoulder

    My system now screaming oversold but it’s 15:22.

    Not gonna risk any position over this madness weekend. Have a good weekend everyone.

  • BKXtoZERO

    I am keeping it small, diversifying positions,using stops and doing well.

  • Billabong

    Part of trading is learning how your broker works. You may want to go back and ask them if you can buy with unsettled cash proceeds. Your broker may allow you to buy as long as it settles on the same or next day as the original trade. You can sell the second trade anytime but you can’t buy a third position until the second one settles. Any brokers on this site can elaborate on this process for retirement accounts…

  • Billabong

    Your not planning to live off the 401K are you?

  • OzarkHillBilly

    Currently debating whether I want to risk the madness or not. If I close out now, at least I can say I had a good week.

  • BobbyLow

    Still have ECB Meeting and Decision over weekend?

  • BKXtoZERO

    100% cash :-)

  • http://www.ProfitFromPatterns.com/ Ivan K

    O’billy – holding over a weekend is inviting ‘unlimited’ risk … do the maths on your approach / RBT to decide if the extra, if any, return is worth it.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Scott – au contraire … totally relevant … as the same will arise another time … and for the record, the same game of probabilities made the long unappealling.

  • saltwaterdog

    Fred Hickey just pointed out the new CoT data for ES, largest net short position by large specs since June 2012

  • Billabong

    “waiting period”, not necessarily…..

  • Edd

    My daily system dating back 18 months shows a literal wash; 50%, breakeven. This does not include the anxiety of the Mondays coming in and being significantly down and/or the weekends spent nashing my teeth with open positions. I close out any open daily trades Friday moc no matter what. The account shows zero effects and life is much happier.

  • Billabong

    Hedging by CTAs not wanting to sell long positions?

  • saltwaterdog

    what markets are they likely long and using short S&Ps to hedge?

  • OzarkHillBilly

    You’re right, of course. I closed out except for a couple of lotto tickets. My trading has actually improved by having my back to the wall over the past few weeks and months. I know for some people it’s the opposite, but being in a situation in which I really can’t afford to lose much has forced me to deal with reality, so to say.

    BTW, I always appreciate your input.

  • http://www.ProfitFromPatterns.com/ Ivan K

    O’billy – hold that thought / feeling … when engaging in active risk-taking as if ‘having my back to the wall’ helps ensure longevity … and longevity helps ensure a positive outcome.

    You are very welcome.

  • Billabong

    I don’t know but I’m asking the question because hedging plays a large roll in CM for many managers. So when Fred Hickey throws out information like that, he should also show how the short positions are being used and what is the net size.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Edd – is that not the real reason (life is much happier) for playing in the cesspool?

  • Edd

    Amen, I work to live not the reverse. That being said, I truly enjoy trading. Most days I do not consider what I do as work. I feel that I am blessed for having the opportunity to play in this cesspool. It might just be it is simply the shiniest turd in a very much larger cesspool. Thanks, always have an eye out for what you freely share here.

  • saltwaterdog

    the figure is a net figure, not absolute shorts. No question, fund managers hedge in futures, and in S&P futures, they’re hedging long positions in single stocks. Those are HFs and sometimes MFs. Not many CTAs are trading single stocks, and if they are, not investing in them with a holding period, or overall size, to warrant using futures (as opposed to selling the stock).

    In this case the simple data point is that overall, non-commercials (specs) are more net short as of the last filing than at any point in over 3yrs. This position is 3 std dev from the 20wk mean.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Edd – you may find that exiting prior to MOC produce vastly better results … you are not alone in cashing in the chips at the end of a week !

  • http://www.ProfitFromPatterns.com/ Ivan K

    S’dog – using the COT figures best results (in a broad sense) come from looking for a marked polarity between the specs and the better capitalised players … for pretty obvious reasons.

  • saltwaterdog

    Ivan… I primarily look at daily charts, typically doing so during the period between sessions. I have taken of late to evaluating them near the close instead, and often that leads to an exit of an existing position, with the understanding that a new order, sometimes in the same direction, and sometimes opposite, will be placed. I have found that often I am left exiting at a better price, and/or allowed for a more reasonable entry after the rollover. This practice was something you suggested in this forum before, and may seem obvious, but has had a marked impact on my process.

  • Edd

    Thanks, I do just that Ivan. I trade the 10 min chart everyday all day with a different system. I watch that with keeping in mind the status of my open daily positions.

  • OzarkHillBilly

    I think it will just be more of the same. If I was betting, I’d say that nothing gets “decided” until next week … but I’m not willing to risk anything on it.

  • BobbyLow

    Beats playing Bingo with the rest of the old folk doesn’t it? :)

  • BobbyLow

    If I was going to make a bet on it I would have to do as George Constanza would do and that is try to figure out what was going to happen and then bet the opposite. :)

  • OzarkHillBilly

    In that case, I’m sure we will be celebrating Festivus together.

  • saltwaterdog

    Thank you… the Commercial net position is a rather uninteresting small net short position as of this filing

  • http://www.ProfitFromPatterns.com/ Ivan K

    B’low – is that the only other choice now in the ‘developed’ world ?

  • http://www.ProfitFromPatterns.com/ Ivan K

    S’dog – welcome and all about perspective … so easy in this arena to get caught up with mere verbiage … and miss the real message being offered.

  • BobbyLow

    LOL

    No, but Bingo is very big over here in “Senior Citizen” Retirement Communities. I was joking around because waiting for the numbers B15 or I 34 to be called isn’t quite the same thing as waiting for a trading order to be filled. :)

  • http://www.ProfitFromPatterns.com/ Ivan K

    B’low – nurturing a herb garden or even recording childhood experiences has its own rewards … and beats waiting for a fill … but then each to their own.

  • Edd

    LOL, ha,ha tell the wife all the time gottta go to the bingo parlor getting ready to open. How was bingo today dear? Just a couple of old farts. Beats shuffle board I guess.

  • BobbyLow

    I’ve been very fortunate to have had a lot of great experiences to reflect on. But as far as my day to day activity there isn’t much else that I would rather be doing than what I’m doing. I have a great wife, I have everything that I need, my mind is busy all day everyday, and I’m rarely bored.

    Through all this I achieve a certain degree of serenity and I wouldn’t want to change anything.

  • http://www.ProfitFromPatterns.com/ Ivan K

    B’low – ‘reflect on’ vs ‘recording’ … every single person’s life story has value, meaning and lessons … yet so few are actually recorded … my great great aunt was born in 1900 and moved on in 2002 … talk about stories and a perspective of history that have also ‘moved on’ … neither she nor I did the recording part … yet much was reflected upon.

    And yes … an involvement with dynamic markets does / can provide a raison d’etre … I actually had a doctor ‘prescribe’ a patient of his to come and embark on my one-on-one L.I.V.E. programmes.

  • OzarkHillBilly

    Generally, you may purchase with unsettled funds, but you can’t sell what you bought with unsettled funds until the original funding transaction settles (or a deposit is made). It’s a recipe for disaster if you get caught in something and can’t get out.

  • Scott Phillips

    You are exactly correct, particularly on Crude Oil

  • BKXtoZERO

    I have built it up and have a nice cushion. I am up more than other regular types that I work with and am way more careful now about keeping it that way thanks to things learned here. I was totally reckless with my trading account years ago but I am keeping things small and tight on this. Thanks. Y’all do seem concerned for me, IE Scott, I will be fine and am doing well.

  • BKXtoZERO

    BTW, the real goal of that account (for me) is to get into commodity ETFs when the time is right, USLV, UWTI etc. I am probably one of the few who likes silver yet has not only not lost anything during this whole correction but am up on my physical from 2008. I am up big on crude trades as well.

  • Scott Phillips

    You are trading without a system.

    By definition you WILL lose money in the long run.

    You aren’t a special unique snowflake, every single trader without a system loses in the end. Legions, veritable armies of guys just like you have ruined their retirement accounts doing exactly what you are doing.

    Pull your head right in. Stop trading. Take 6 months or so to develop a system and trade it for small size until you can trade it perfectly. Measure results.

  • http://evilspeculator.com molecool

    ^^

  • http://evilspeculator.com molecool

    ^^^

  • BKXtoZERO

    I would like to base my “system” on divergences on the RSI on a 10 day to 3 month time frame as well as bollinger bands and position above or below moving averages which is what I do now but loosely. RSI is kind of like the “zero” I guess but a poor man’s version of it. I have a house that needs lots of work and a 3 year old and a full time job so getting a system together for me has been beyond hard.

  • Scott Phillips

    Actually NO you won’t be fine, you WILL lose all your money and decimate your retirement account!

    Take it from someone who lost about a million bux when he started (after being up about the same when he started)

    Take 50 traders. Only ONE of them will be long term profitable. Do you seriously, right now, think that you are that guy? Because you read a good blog and know a few things? Based on what?

    Jeeez

  • Scott Phillips

    I see. So you trade without a system, because “trading with a system is hard, and I’m too busy to trade properly”

    That is EXACTLY like an athlete saying “I know the olympics are coming up, but I’ve been a little busy to train. Still expecting to do well, I’ve got a lucky feeling about it”

    Thinking about a system you might like to build, and having a system you have ACTUALLY built, are about 1000hrs of work apart.

    Don’t be a pussy. Do the work. If you cannot bear the thought of stopping harmful behavior (trading) then that is very close to a working definition of addiction. Think about it. You sound just like a heroin addict who insists that he “has it under control”

  • Scott Phillips

    Post all your trade spreadsheets. If you can’t – then your records are not up to date and you aren’t even checking your results (except the PL column)

    Seriously mate, there is no quicker route to fuck your life, your financial future, and your family’s financial future than what you are doing right now.

    Ever go to the fair? You know those carny games, 3 throws for a dollar? They look really easy right, but nobody ever wins.

    Trading is exactly and precisely like that. For example out of the armies of even exceptionally well trained traders like Ivan’s students, only a scant handful have been able to make it.

    Every person reading this who has traded without a system has suffered catastrophic losses, but you are somehow different?

  • Scott Phillips

    Sadly guilty as charged, back in the day

  • Scott Phillips

    Zeroedge!

  • BobbyLow

    When it comes to market reaction to Geo Political Events George Costanza’s “if every instinct you have is wrong than the opposite has to be right” has an uncanny way of being spot on most of the time.

    Just when you think there’s a chance that we’ll get at least a temporary repreive from the Geece monatary fiasco, we have: Drum Roll . . . . . . . . . . .

    “Greece debt crisis: EU summit cancelled as talks continue”

    http://www.bbc.com/news/world-europe-33497353

    I have no idea what the Futures will be like tonight but this is when it’s nice to be in cash. When shit like this happens the Markets like to say things like Henry Hill said in “Goodfellas”. Visulaize Henry (Ray Liotta) saying “Everythings Going to be OK, F You Pay Me”, “EU we’ve got a problem, F You Pay Me”. “Another meeting and things look good, F You Pay Me,” Meeting Postponed F You Pay Me”, and the shit goes on and on and on and each time it’s “F You Pay Me.” :)

    https://www.youtube.com/watch?v=fXMCoIeSaYw

  • BobbyLow

    Ooops, now it looks like they’re back to work, So it would have been F You Pay me again.

    Can’t make this shit up. It’s s good thing the markets are not open yet.

    ” A eurozone summit has resumed its work after being temporarily suspended to enable leaders to meet Greek PM Alexis Tsipras separately over a bailout deal.”

  • BKXtoZERO

    Thanks, I am not that super aggressive.

  • Grant

    Quick question. Is there a difference in what hedge funders call a black box system and what many employ here in the forms of varying RBT’s which are trend following? The reason I ask is I came across this article on zeroedge which was eye opening.

  • Scott Phillips

    Most of the black boxes employed by hedge funds are using roughly the same set of six or so different maths based processes using, mostly no stops and campaign management. Think pairs trading, covariance analysis, georgraphical arbitrage, index arbitrage (simultaneously buying the components of the dow 30 and selling the dow futures or vice versa) etc.

    A blog by “ernie chan” is a good place to start, and overview of these things.

  • newbfxtrader

    Use the news events to get better entries …

  • Skynard

    Massive move coming, this is nuts.

  • Skynard

    AUD train leaving:)

  • http://www.ProfitFromPatterns.com/ Ivan K

    Sky – basis what t’frame view … ‘massive’ is contextual !

  • Skynard

    Looking for another long setup

  • http://www.ProfitFromPatterns.com/ Ivan K

    Sky – Kiwi is the leader of this pack from my 30 m view.

  • http://ibergamot.blogspot.com/ i Bergamot

    Grant,
    lol, dude, nothing in your question is ‘quick’.
    Actually, you are raising a MONUMENTAL topic here, and very important to your own financial survival.

    But first of all, this ‘black box’ issue – a misleading game of words by author of cited article. This term – Black Box – is from around 1970’s, when it became popular to sell rudimentary trading systems for about $3000. All the workings of these methods where revealed only after purchase, so you are buying a box of unknown goods – a Black Box. In a slow information, pre-internet times, it took awhile for people to figure out a scam.

    Much less scandalous issue is a Rule Based system, that makes operating in financial markets simple and repeatable. It is employed not only by ALL hedge funds, but by EVERY financial organization, institution, professional trader and jewish grandmother. And nobody will spill the beans. Not GS, not Molecool, not me. Call it Black Box or RBT or whatever – If such method is viable, then its not in operator’s best interest to reveal settings and levels. No?

    But here is a kicker: Your article is right!!!
    At the end every method fails. At the end every trader loses money.

    Think about it deeply:

    WHEN YOU OPEN A CHART – WHAT DO YOU SEE ?

  • http://www.ProfitFromPatterns.com/ Ivan K

    I’mot – Club 3000 did have quite a following in the 80’s … how little things have changed.

    Volatility can be removed in several ways … as a study of history reveals … one such way is to change the leverage available to players … another is to increase min account sizes … another is to apply a taxation blowtorch … and the list goes on.

    In ‘best interests to reveal settings’ … this one always presents a challenge … in some cases the answer is yes and in other cases the answer is no … in the end the actual question may be totally academic.

    Knowing when to hop of the train is an art unto itself … and that applies to knowing when enough is enough on a personal level … ‘every trader loses money’ is accurate … this does not mean that every RBT / method etc ‘fails’ … many market legends would have something to say about that bold assertion.

  • http://ibergamot.blogspot.com/ i Bergamot

    How do you measure ‘fail’?
    Numerically? time based? both?

  • http://www.ProfitFromPatterns.com/ Ivan K

    I believe that was your choice of word … over.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Pudding time for the long side … basis 30 m.

  • http://www.ProfitFromPatterns.com/ Ivan K

    BESL time … hence a free ride from here on in / up.

  • phylum

    Time …

  • http://www.ProfitFromPatterns.com/ Ivan K

    Phy – 60 m ES provided a steady path (again) … on a Monday / Sunday … for those who attended.

  • phylum

    ty Ivan …. how do we contact you?

  • http://www.ProfitFromPatterns.com/ Ivan K

    Chart below

  • http://www.ProfitFromPatterns.com/ Ivan K

    “To accomplish great things we must not only act, but also dream, not only plan, but also believe” … Anatole France (French poet, journalist and novelist 1844 – 1924)

  • http://www.ProfitFromPatterns.com/ Ivan K

    Grant – there are actually 3 types of boxes (out of the box) … that go way back … a black box is any device whose workings are not accessible to or understood by the user (according to The Washington Post the first was a gun site used during WWII in Flying Fortresses … with hidden components that the crew, whilst they did not know how they worked, probably believed they might be crucial to their survival … some folks reading this may actually recall them).

    Black Boxes did appear in the financial markets with the advent of computers … back in the 1970’s. They later morphed into Gray Boxes where the user could change some of the parameters / settings inside the Box … and finally as a White Box … aka a RBT that is both fully disclosed and the user can play with / optimise / change all the various components … many of the ‘testing’ programmes available today would fit in the White Box category.

  • mugabe

    Mathematically, there is no guarantee that any system will not go to zero if it doesn’t have a 100% success rate. However, the better the expectancy, the win/loss ratio and the narrower the standard deviation (especially of losses), the less likely this is to happen … *assuming* that the present replicates the past to some degree.

    It seems to me that to best way to avoid risk of ruin is:
    1 to have as robust a system as possible
    2 to avoid portfolio heat
    3 to avoid leverage
    4 to employ multiple systems based on different premises
    5 to have a pretermined system shut-off point

    All of the above will mean reducing risk and profits (and losses)

  • http://evilspeculator.com molecool

    Yeah, that seems to be missing in today’s culture. Increasingly people are adapting a very cynical mindset and great aspirations mostly revolve around personal enrichment. I mean just look at the we we build cities today – they are mostly soulless and bland. Back in the days a city would spend half a century completing a major construction project – today we have structures which have a lifetime less than that.

    The time of dreams and thrive towards a higher purpose has been replaced with the pursuit of quick wealth. Now that has always been part of the equation but there used to be more – a vision of a functioning society with a common shared basis. Just look at cities like Venice, Paris, Rome, Prague – we couldn’t and wouldn’t produce anything close to it even if we tried. I think the problem is relativism/sophism – everything is considered equal and everything that was once believed to be immutable is now being challenged. We live in a time of social engineering and how could anyone produce anything lasting in such a time?

  • http://evilspeculator.com molecool

    Exactly – the words one chooses reflect the inner mindset.

  • http://evilspeculator.com molecool

    You write a message on a piece of parchment, roll it up and throw it into the ocean. You wait a few years until the bottle has made its way to Vanuatu and the crabs deliver it to Ivan.

  • http://evilspeculator.com molecool

    “and jewish grandmother. ”

    LOL – I almost spit my tea all over the screen! :-))

  • http://evilspeculator.com molecool

    Then again you have guys like Ed Seykota, Bill Dunn, Bill Eckhard, etc. who have been trading the very same system for decades. They had their down years but over the long term their systems have maintained an edge. Despite rapidly changing market conditions and despite exponential increases in cheaply available computing power.

  • http://www.ProfitFromPatterns.com/ Ivan K

    A simple safeguard to ensure that you never face your account ‘going to zero’ is … to only place 50% of your capital in the account … this actually virtually guarantees that you will never even lose 1/2 of your funds (barring the BS factor of the market being the market and gaping over your stop loss level … and going limit against you for a day or three !)

  • http://www.ProfitFromPatterns.com/ Ivan K

    To name but a few who have chosen a certain profile.

  • http://www.ProfitFromPatterns.com/ Ivan K

    I guess part of the delay may be finding the bottle … or

  • http://www.ProfitFromPatterns.com/ Ivan K

    3D printing is another game-changing piece of technology … that is barely in its infancy … oh what a (brave) new world awaits all!

  • mugabe

    depends on the system … Bill Dunn had one 60% drawdown … who’s to say it couldn’t be bigger in thev future? (although he’s made his system less volatile in recent times)

  • Skynard

    FN /ES employing 30 pt moves these days over night.

  • http://evilspeculator.com molecool

    “Another common trait of these models that was that, in order to minimize volatility, the holding periods had to be much shorter than a lot of us had anticipated. So execution [both initiation and liquidation] became a critical factor. Back then a 2-3 day holding period was considered acceptable, but brief, although there were plenty of intra-day strategiesā€¦just not at my firmā€¦at least not yet. With these seemingly high velocity trading models [at the time], price slippage and execution costs, became supreme enemies of forecasted returns. To this day the toughest element to back-testing is accessing tick data and accurately pinpointing execution prices. Given this unpredictability, liberal price slippage was built into every modelā€¦and the modelā€™s returns continued to compressā€¦not to mention the computer time charges assessed by the leadership [which always pissed me off].”

    Yup, been through that exactly.

    As smart as any of us think we are – there are people out there who already been there and done that. There is no holy grail – you can only hope to find a small edge in the confines of your set of constraints – technically and specific to your specific access (i.e. broker and clearing firm). As a retail rat you have to deal with shitty brokers and spreads. As you move up in the food chain you find better spreads and faster execution but you are far less nimble and moving in/out of
    positions may move the market and wake the sleeping dogs (i.e. bots driving the price against you). TINSTAAFL.

  • http://evilspeculator.com molecool

    It’s awesome – there’s a great site you should check out 3dprint.com. This market is about to explode.

  • newbfxtrader

    Should fill the gap. Although I am not sure whats holding back the kiwi and aussie…

  • http://www.ProfitFromPatterns.com/ Ivan K

    Mega is a ‘good’ description … entire buildings are being already fabricated … 30+ storey buildings are being erected in a month or so … talk about the quickening !

  • newbfxtrader
  • newbfxtrader

    best way to take out resistance dont you think?

  • http://evilspeculator.com molecool

    No what I meant – I don’t invest in stocks. I truly believe in the technology – don’t care about the companies currently displacing the buggy whip.

  • newbfxtrader

    I think it will be awesome even in medical/surgical applications.

  • http://evilspeculator.com molecool

    So hard finding reliable crabs these days.

  • http://evilspeculator.com molecool

    Yup, Bill Dunn is nuts – I would not trade his system.

  • Skynard

    Big move is also coming, pesky dollar.

  • Skynard

    Best way to get the bus empty:)

  • newbfxtrader

    http://money.cnn.com/data/fear-and-greed/

    we hit 9 on the index last week with less than 10% move in /ES.

  • Skynard

    Exactly, these are the important factors by which my decisions are based from. 95% of the crowd still wanted it to go down, including this site:)

  • newbfxtrader

    Heh sugar trade has been sweet :) Moves are big nowadays so I have to be careful with /ES

  • http://evilspeculator.com molecool

    Yeah, you always say that šŸ˜‰

  • http://www.ProfitFromPatterns.com/ Ivan K

    It already is being used in that field … reportedly.

  • Skynard

    /DX filled the gap, added short.

  • Skynard

    Yep, had the pullback which we bought back. Good trade thus far:) If the dollar will truely correct you may see commods rocket! Good short on Bucky right here

  • Skynard

    Watch the dollar today:)

  • http://www.ProfitFromPatterns.com/ Ivan K

    And every day … in the ‘Now’

  • Skynard

    Lol, exactly. On my screen as you say:)

  • http://evilspeculator.com molecool

    ) ( ) (
    ( /( ( ( ) ) ( /( ) ) * )
    )()) ( )))( ‘ (()/( )()) (()/(` ) /(
    ((_) ) ((_)() ) /(_))((_) /(_))( )(_))
    _((_)((_) _(())_)() (_)) ((_) (_)) (_(_())
    | | || __| ((_)/ / | _ / _ / __||_ _|
    | .` || _| // / | _/ | (_) |__ | |
    |_|_||___| _/_/ |_| ___/ |___/ |_|

  • http://ibergamot.blogspot.com/ i Bergamot

    We can learn from history, but not as much as you think.
    How come we seem to experience once-in-a-hundred-years events every couple of years or so? Remember that swiss-euro move a few months ago? That thing was in a order of 21 standard deviations, meaning it could never happen… not in a thousand years…

    Every point you outlined is correct. I’ve done them all, plus some others – all in an effort to limit losses and avoid a risk of ruin. I succeeded… I don’t lose… , but haven’t made any kind of money to brag about either.

    Don’t take this lightly. I am talking years here. Bull and bear and in-between. Years!

  • mugabe

    I agree. Over the long term you need to be very good to post, say, consistent 20% + returns: dedication + discipline + superior / robust system.

    I have no illusions here … not everyone is Michael Jordan.

    Speaking personally, I use a v simple system momentum system using rate of change – over the long haul (years / decades), produces v good compounding, but definitely not ‘hall of fame’ returns.

    If you’re interested (you probably know all of this), good starting points are:

    http://www.dualmomentum.net/2015/04/understanding-dual-relative-and.html

    http://www.dualmomentum.net/2014/01/introducing-global-equities-momentum.html

    http://www.amazon.com/Dual-Momentum-Investing-Innovative-Strategy/dp/0071849440/ref=la_B00J16UT3W_1_1?s=books&ie=UTF8&qid=1436804323&sr=1-1