International Index Trading

[Edwood]

Hi Sinner - sorry been up at Vomo for a bit, hope all has been going OK

Anyone else thinking correction over, and on to new highs for the year?

Ed

 

[Edwood]

update on that strategy to buy the wed into opex, sell teh mon after (Dow)
pretty much exact same chart on XAO fwiw

pretty cr4p again this quarter

 

[Edwood]

http://www.telegraph.co.uk/science/...ts-braced-for-solar-tsunami-to-hit-earth.html

 

[Edwood]

not really international indices but interesting...

I found it interesting that hedge fund legend Stanley Druckenmiller announced his retirement this week, ending an incredible 30-year run in hedge fund management. And today's New York Times ran a story highlighting the ongoing difficulties suffered by the "quant" hedge funds. Massive government stimulus may be benefiting bond fund managers, but it's certainly not improving the overall functioning of the financial markets. I would not be surprised if sophisticated market operators such as Mr. Druckenmiller look at the current backdrop and are content to exit the game before the bloody havoc of the next bursting Bubble.

http://www.safehaven.com/article/17910/lets-change-the-debate

Have had a good week shorting AUD against NZD, shame I closed into the weekend.....

 

[Edwood]

FTSE getting close to the upper parallel of the very long term down fork which got the April reaction. Around 5620 would see it contact

 

[tech/a]

Nice thanks for the chart

 

[Edwood]

Thanks Tech

Dow futs spiking up for expiry - & taking FTSE with it - Aussie not following tho....

pop n drop?

 

[Edwood]

FTSE spiked to 5612 cash (& 5617 on spreadbet) & now selling down - didn't quite make that 5620. Guess that's a fail then...?
short now anyways

 

[tech/a]

FTSE spiked to 5612 cash (& 5617 on spreadbet) & now selling down - didn't quite make that 5620. Guess that's a fail then...?
short now anyways

Nice.
I was out at dinner spending money!
My chart says 5599 big volume spike like a beacon!

 

[Edwood]

key reversal day on FTSE today as well, looks like US is trying to hold up til next week

what time was that volume spike Tech, might've just been expiry at 10:15?

 

[Edwood]

not much posting here for a while, strange considering XAO has been treading water / range-bound for so long...

Update on the very long term FTSE view. Broke through the upper parallel on downtrending PF, retested then bounced to median line on the uptrending PF. A break higher to the upper parallel would be interesting but can't see it myself

 

[sinner]

Fresh bear proposition:

* Potential impulse 5 wave up formation occurred in Q310, Q410. Blue pitchfork supporting, wave 3 high intersects the median line, 1180 as wave 4 low candidate. I would not expect wave 5 to reach the median line again.

* Market breadth diverging, Summation Index did not support the move higher during December although I recognise this may be possible for other than index bearish reasons and therefore continue to watch market breadth closely.

* Ivolatility.com IVX mean very close to 52wk lows, VIX itself close to longer term weekly support at 16.

Based on wave count we could expect a test of wave 4 lows or below in an A-B-C corrective formation. The timeline for a correction could be quite short, as equity put/call ratio relative to its 50 day moving avg show the options market is relatively complacent about the swing up from 1000 lows.

To attempt profit from this proposal, I bought OTM 118 SPY puts for Feb and March expiry at market cost of 0.39 and 1.03 per contract respectively.

 

[sinner]

Fresh bear proposition:

Remainder of supporting charts:

1. 10 day SMA of NYSE Advance/Decline. As you can see there has been serious trouble making those higher highs since Sept '10 and we are stuck in a smaller consolidation for now 500 is clearly resistance even as we continue to make higher highs on the index.


2. TRIN (short term index) approaching overbought, a move below 0.5 followed by close back inside the 20,1 bollinger of TRIN could be indicative of a short term top (> 2-3 is oversold).


3. VIX weekly P&F plot to highlight potential support and revisit of longer term low. Obviously the potential for a further breakdown exists, but for now I am game to buy puts as speculation on the anti-complacency side.


The low pole reversal pattern is actually quite strong (although I don't know about weekly p&f chart patterns) and as long as there is no lower low here it could be an indicator for higher volatility that I didn't consider previously.

The low pole reversal pattern begins with a long column of Os down, which is considered the low pole. A low pole is defined as a column of Os that drops more than three boxes below the previous column of Os. In the chart above, you will see that the second column of Os falls below the first column of Os by five boxes. The Os represent supply and eventually the selling will subside and demand will resurface causing the chart to reverse up in to a column of Xs. If the initial amount of demand is substantial, often times it indicates a low is in place for the stock. The initial demand is considered substantial if the column of Xs that follows the low pole retraces the low pole by more than 50%. To determine the 50% level one would add up the number of Os in the low pole column. In the chart above there are nine Os in the low pole. Therefore, the next column of Xs needs to retrace it by more than 50%, or by at least five Xs.

From http://www.arlington-capital.com/point_figure_charts/buy_signals/low_pole_reversal.cfm

So we would need to see the VIX at 19 with no lower low on the weekly to satisfy the 50% retracement rule and meet this setup. Reversal below probably indicates I am very wrong and volatility is about to get killed while the index melts up another 50 points.

 

[Edwood]

nice analysis Sinner, thanks

fwiw I agree we're at a possible turn point - but I'm not underestimating the potential to pop-&-grind this higher, especially given last year with 134 of the total 143 S&P points gained coming on the 1st trading day of each month

 

[sinner]

nice analysis Sinner, thanks

fwiw I agree we're at a possible turn point - but I'm not underestimating the potential to pop-&-grind this higher, especially given last year with 134 of the total 143 S&P points gained coming on the 1st trading day of each month

Agreed 100% Edwood.

This is an opportunistic trade standing in front of the Fed. Low premiums on bearish OTM options provided a slightly more interesting R:R to just shorting the futs otherwise I would not have taken it at all.

Pretty bad numbers out of the US last night, as well as extremely bad downward revisions of the Dec numbers by BLS. More numbers on their way out of the US tonight. Lastly, Treasuries seem to be at a tradeable support level so if they bounce higher on POMO buying or a "rush to safety" after bad numbers tonight it's likely the SP500 will move down a little.



Last nights volume was up on the previous days, buyers managed to push the price a teensy bit above the prior high before sellers took control but in the end sellers weren't able to even test the prior low and we barely closed down.

 

[professor_frink]

Remainder of supporting charts:

1. 10 day SMA of NYSE Advance/Decline. As you can see there has been serious trouble making those higher highs since Sept '10 and we are stuck in a smaller consolidation for now 500 is clearly resistance even as we continue to make higher highs on the index.
View attachment 40821

Hi sinner,

Just wanted to make a comment on this chart - when looking at breadth with a fixed lookback period like you are doing here, it's going to lead you astray a little IMHO.

When you look at a rally as it develops, the initial stages are obviously going to be the strongest with the better breadth numbers coming in. As the rally develops and the % moves become smaller, you'll end up with a breadth chart that looks a little sick, when in fact all that's happening is the stronger breadth numbers are being dropped from the calculation and are being replaced by ones that are still in line with the market moves at the time, but that are slightly weaker than the ones being dropped.

To better illustrate what I'm getting at(well trying to anyway!), have a look at the ad line average that you illustrated in your post, but plot the ROC with the same lookback period on the chart. What you'll find is they will track each other fairly closely. Chart below should show what I'm talking about. Hopefully the chart is big enough I took the screenshot on my netbook.



Personally I think you'd be better off just looking at cumulative ad lines for this type of thing.

Apart from that one small point, thanks for the post, twas interesting

Cheers

 

[MRC & Co]

Out of interest Professor, does that 10 SMA of NYSE adv/dec measure on a % basis? Because the rolling 10 day avg adv/dec line I use from 'now' Bloomey data only measures advancers vs decliners, not % moves, however, like Sinners/your oscillator there, the 'breadth' or at least advancers relative to decliners, are still very low consdering the index keeps printing new highs.........

 

[professor_frink]

Out of interest Professor, does that 10 SMA of NYSE adv/dec measure on a % basis? Because the rolling 10 day avg adv/dec line I use from 'now' Bloomey data only measures advancers vs decliners, not % moves, however, like Sinners/your oscillator there, the 'breadth' or at least advancers relative to decliners, are still very low consdering the index keeps printing new highs.........

G'day MRC, good to see you still floating around the place

The top avg is just based on the number of advancers minus decliners for each day.

Just as a small side note as well too, most weakness that's coming out of any breadth measures on the NYSE is coming from the muni funds - pretty well everything that's making new 52 week lows right now is coming from there, which IMO is going to be polluting the numbers a little.

Of course that can all change if the market decides to start focusing on the problems in that area, but right now it doesn't appear to be an issue

 

[sinner]

Hi sinner,

Just wanted to make a comment on this chart - when looking at breadth with a fixed lookback period like you are doing here, it's going to lead you astray a little IMHO.

Personally I think you'd be better off just looking at cumulative ad lines for this type of thing.

Apart from that one small point, thanks for the post, twas interesting

Cheers

Hi frinky,

Exactly as I stated:

I recognise this may be possible for other than index bearish reasons and therefore continue to watch market breadth closely.

Secondly, the McClellan Summation Index is cumulative and this is what I watch most closely. The divergence is clearly marked.

Thanks for your thoughts

MRC, the AD line I used to get 10-sma of, calculation here:
http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:advance_decline_indi

=AD Line (previous value) + Net Advances (current value)

 

[MRC & Co]

Yep, still float in and out from time to time Frink. Hope all is well with you and the trading is doing well! I get what you mean now, sorry misread and thought you meant the adv/dec line was measuring % moves, didn't see the part where you talked about the earlier results dropping out of the calc.

Thx for the link Sinner.