Trading the Bounce

[ducati916]

I believe that one of the uniqueness of the current situation, one of the real "it is different this time" is the speed factor.
Mostly due to technology changes, mood and market swings are faster, previous developments which used to take months are done in weeks, crashes fully develop in days.
As such, it is harder to parallel todays to past 1900's or even 2000 events.this is both a problem and an advantage.your learnings mental or quant becomes obsolete, my weekly systems are too slow to be efficient, going daily becomes a pain:
By the time you get last world data, you have only a few hours before Sydney opening.
On the other end, you can potentially beat the old timers and it removes the advantages of some self learning systems

As to speed: #1 with a bullet baby!

It could be that the speed, caused comparisons with 1929, 1931, 1934. The response however was vastly different to the 1929 response:

Which is accounting for the current situation.

jog on
duc

 

[ducati916]

So pretty much as expected, the SPY retested the former resistance, now support and we are into Bull market territory. The next big test will be the previous (all time) high of late February 2020 at 340+/-

That closes the 'Bounce' thread.

jog on
duc

 

[aus_trader]

That closes the 'Bounce' thread.

Let's keep going, to all-time-high's, now that we've come thus far... To quote a Macbeth quote from Shakespeare's:

"Returning were as tedious as go o'er"--He could turn around, go back to the bank of that river of blood, but it's too late. He's half way across, so he keeps going.

My stomach says, we will not see all-time-high so soon with the continuation of this V-shape recovery. But I'll just take some antacids and calm the gut and keep trading this bounce as with selective picks in the speculative stock portfolio as long as you guys continue with chart guidance and navigation through this volatile times.

 

[Smurf1976]

That closes the 'Bounce' thread.

I think that's a matter of perception at least partly.

My view is that until such time as the February highs are passed then it remains at least possible this is a bounce. That's not saying "is" it's saying "possible".

Eg as a hypothetical, a double top wouldn't seem impossible as a scenario. First top in February, second one in the next few weeks, then down.

Note that I'm just throwing ideas around here not saying they'll necessarily happen.

 

[ducati916]

Let's keep going, to all-time-high's, now that we've come thus far... To quote a Macbeth quote from Shakespeare's:

"Returning were as tedious as go o'er"--He could turn around, go back to the bank of that river of blood, but it's too late. He's half way across, so he keeps going.

My stomach says, we will not see all-time-high so soon with the continuation of this V-shape recovery. But I'll just take some antacids and calm the gut and keep trading this bounce as with selective picks in the speculative stock portfolio as long as you guys continue with chart guidance and navigation through this volatile times.

Mr Trader,

Take a look at the same chart, next timeframe higher:

We can see just how important that 300 level was. Looking up at the Oct/Nov/Dec 2019, that if you remember was the 'Taper Tantrum'. It still took a year and 3 attempts to break through. This time the market just sailed through no questions asked.

Next stop for this market: the all time high level 340'ish. That is the next test.

There will undoubtably be chop between the 300 and 340 levels. However for the moment, the bears are licking their wounds. 300 was their line in the sand. You will very likely see a short squeeze now that could push the market close to that 340 level quickly.

We can imply where the Bears will make their next stand prior to 340. It will be at 320 and 325.

Currently, demonstrated (again) bullish volume dominates. Previously at the 300 level it was pretty close. The bulls had greater volume, but marginally so. Now they are x2.

At 340 almost 2:1 in favour of the Bulls

Between 300 and 340, what if anything of material consequence can or more accurately will change?

The death rate, unimportant, virus, unimportant, unemployment unimportant. There is a single reality in the market: money. All else is noise no signal.

As to support for the market, 3 lagging sectors (see previous chart detailing current lagging sectors)

With yields of 2.5%, 3.5% and 3% respectively +/-. This market is yield hungry. All 3 of these sectors are strong dividend payers and are capable of supporting the drive through 340.

jog on
duc

 

[aus_trader]

The death rate, unimportant, virus, unimportant, unemployment unimportant. There is a single reality in the market: money. All else is noise no signal.

You said wat I wanted to say Duc. These are the factors along with a bit of rioting in the streets of major US cities that churn my stomach. But I am going to watch how it plays out at the edge of my seat

Chart guidance helps to get out of the way if needed and I want the smartest/wisest of the forum members to think about if there is anyway to predict a convergence of the real street level economy where the heart of businesses and people's spending and confidence lies and where the FED pumping keeps the stock and ETF prices reflated. I don't think people will disagree the two are diverging so much that the gap is getting as big as the grand Canyon... purely referring to US markets that duc is referring to of course, so just keep tiny asx out for now to prevent confusion as to why it's rallying as we are coming out of lockdown.

This is real life learning. ducati916 is doing lot of the work, I reckon we should not let this opportunity go to waste. If we can find a good indicator or ratio or some other matric to show the end of the paper rally and it's time for the real economy to be reflected in the ticker prices I think it'll be a magical find. Not to mention the power such find would have, to position ourselves ahead of the move

 

[qldfrog]

You said wat I wanted to say Duc. These are the factors along with a bit of rioting in the streets of major US cities that churn my stomach. But I am going to watch how it plays out at the edge of my seat

Chart guidance helps to get out of the way if needed and I want the smartest/wisest of the forum members to think about if there is anyway to predict a convergence of the real street level economy where the heart of businesses and people's spending and confidence lies and where the FED pumping keeps the stock and ETF prices reflated. I don't think people will disagree the two are diverging so much that the gap is getting as big as the grand Canyon... purely referring to US markets that duc is referring to of course, so just keep tiny asx out for now to prevent confusion as to why it's rallying as we are coming out of lockdown.

This is real life learning. ducati916 is doing lot of the work, I reckon we should not let this opportunity go to waste. If we can find a good indicator or ratio or some other matric to show the end of the paper rally and it's time for the real economy to be reflected in the ticker prices I think it'll be a magical find. Not to mention the power such find would have, to position ourselves ahead of the move

One thing for sure, it is a pretty scary time.
I am working very hard right now to ensure my aws setup is completed so that i can run my systems on tuesday remotely as we go for a small break by the sea
In normal situation would not worry missing one day too much but everything is on the edge

 

[aus_trader]

One thing for sure, it is a pretty scary time.
I am working very hard right now to ensure my aws setup is completed so that i can run my systems on tuesday remotely as we go for a small break by the sea
In normal situation would not worry missing one day too much but everything is on the edge

All my work is manual, but like you I can't afford to ignore a single day due to family/work commitments etc because the markets are going through the 'calm before the storm' in my opinion. I don't have any proof or other tool to say it with more confidence other than volatility which could spike any day...

 

[qldfrog]

volatility is not bad as it offers opportunities..but also risks...volatility wise, as you can see , it does not seem to be as pessimistic as I am.
So I trade

 

[Warr87]

My current worry is that my system gets fully invested and then the market crashes again (just like it did when I started in Feb). Certainly is scary times. But the system says trade so I do. And I'm sure others have the same worry as me (that a potential crash could happen again taking losses even further).

 

[aus_trader]

My current worry is that my system gets fully invested and then the market crashes again (just like it did when I started in Feb). Certainly is scary times. But the system says trade so I do. And I'm sure others have the same worry as me (that a potential crash could happen again taking losses even further).

I have the same worries, but I don't sit completely on the sidelines as this bounce is continuing, instead buy into selective stocks that I research up, while it continues.

 

[Warr87]

My system has actually been slow to take up new positions. Beginning of the year or last year I could almost fill all 20 positions in the first week or 2. Right now its been about 3 or 4 positions per week. As a fully systematic mechanical trader I don't have a choice though. Fingers crossed though .

 

[aus_trader]

My system has actually been slow to take up new positions. Beginning of the year or last year I could almost fill all 20 positions in the first week or 2. Right now its been about 3 or 4 positions per week. As a fully systematic mechanical trader I don't have a choice though. Fingers crossed though .

Yes best of luck !

Just my opinion, I think it's good your system fills your portfolio slowly coming up from a low. It probably re-risks you from having a large draw-down if you fill up all of your positions in one hit, in case it happens to be at a market top

 

[qldfrog]

Yes best of luck !

Just my opinion, I think it's good your system fills your portfolio slowly coming up from a low. It probably re-risks you from having a large draw-down if you fill up all of your positions in one hit, in case it happens to be at a market top

It can work both way i started with systems in 2019 which just managed to get fully invested by end January 2020..yeap max hit, min gain..outch
Often in amibroker, the difference between using a cross() vs ">"
The disadvantage with slow entry was clear with my first system start in 2019: first half of 2019 was really good for trend, with a slow take off l lost minimum 10%gain just in the first 2 months
Timing is timing: just luck
In short, if you make the decision to invest $n, you want them to work for you ASAP so system ramp up should be ideally short, if not you are not trading a bounce but a trend

 

[Beaches]

My current worry is that my system gets fully invested and then the market crashes again (just like it did when I started in Feb). Certainly is scary times. But the system says trade so I do. And I'm sure others have the same worry as me (that a potential crash could happen again taking losses even further).

I have the same worries, but I don't sit completely on the sidelines as this bounce is continuing, instead buy into selective stocks that I research up, while it continues.

There is a long history of markets climbing a Wall of Worry. There is still a lot of money sitting on the sidelines which is becoming increasingly frustrated with the market refusing to fall back. As that frustration increases, more of the fearful money is being put back into the market and the market continues to climb.

Just trade what you see.

 

[Warr87]

There is a long history of markets climbing a Wall of Worry. There is still a lot of money sitting on the sidelines which is becoming increasingly frustrated with the market refusing to fall back. As that frustration increases, more of the fearful money is being put back into the market and the market continues to climb.

Just trade what you see.

I think you are right. I also assume that institutional investors will try and claw back as many profits as they can before the end of financial year and put their money back in the market.

As you say, trade what you see. Markets go up and I will trade.

 

[ducati916]

Two charts:

So XLF as the example (but most if not all will display the same) of a sector. The important point to note is that the 50SMA is still below the 200SMA. This is true for the broad market as well.

This just provides context for first chart. Obviously the shorter 20SMA will cross the 200SMA first. Generally what happens is that we will see a pullback to the 20SMA (once it has crossed the 200SMA) to test whether it provides support. Assuming that it does, eventually the 50SMA will also cross.

That 20SMA should cross sometime this week and we can expect a pullback. Typically these things always seem to coincide with the weekend.

In the US, the reason for this is that the Market Makers (MM) (obviously) make their money in the number of shares actually transacted. Big blocks of shares 10M, 50M, etc will require that the MM at least offer a price at the VWAP price, hence the periodic pullbacks etc. The 'machines' jump on these (sometimes) pushing price below the VWAP or whatever price has been negotiated. Often the 'Bears' get excited, and jump on board, only to be trapped (assuming it is simply initially a VWAP type exercise and not a legitimate reason) when the MMs reverse the direction once more.

jog on
duc

 

[qldfrog]

Two charts:

View attachment 104217
View attachment 104218

So XLF as the example (but most if not all will display the same) of a sector. The important point to note is that the 50SMA is still below the 200SMA. This is true for the broad market as well.

View attachment 104219

This just provides context for first chart. Obviously the shorter 20SMA will cross the 200SMA first. Generally what happens is that we will see a pullback to the 20SMA (once it has crossed the 200SMA) to test whether it provides support. Assuming that it does, eventually the 50SMA will also cross.

That 20SMA should cross sometime this week and we can expect a pullback. Typically these things always seem to coincide with the weekend.

In the US, the reason for this is that the Market Makers (MM) (obviously) make their money in the number of shares actually transacted. Big blocks of shares 10M, 50M, etc will require that the MM at least offer a price at the VWAP price, hence the periodic pullbacks etc. The 'machines' jump on these (sometimes) pushing price below the VWAP or whatever price has been negotiated. Often the 'Bears' get excited, and jump on board, only to be trapped (assuming it is simply initially a VWAP type exercise and not a legitimate reason) when the MMs reverse the direction once more.

jog on
duc

So can expect a rise till friday and traders should get out Friday oz time. interesting
I would understand market here being edgy keeping money in over the weekend..i am. Should see if my daily systems could have an edge getting out quicker on Friday's open

 

[aus_trader]

I think there is a 'Risk ON' in the markets based on the flight out of the safety of the US dollar into currencies like ours:

Not sure if this is due to the USA situation or due to actual risk appetite ?

Just something that caught my eye, which I thought was interesting.

 

[qldfrog]

Feeling good being in before the lemmings, but when do we jump....