Trading eminis with cycles

[theplumber]

Greenspan took investors by surprise, saying that foreign appetite for U.S. assets would likely decline and clearly stated that those who were unprepared for higher interest rates were bound to get burned and were "desirous of losing money."

"Greenspan's (interest) rate comments were the ones that sent stocks lower today -- it was almost instantaneous," said Brian Williamson, vice president, equity trading, The Boston Co. Asset Management.

"We had a triple whammy -- dollar, rates and oil. The three factors in combination led to a pretty major sell-off across the board," said Williamson.

This was from Reuters on Friday. If you were scratching your head as to why the Friday selloff happened, shame on you. It was that obvious. I've stated many time most fund managers are long, hegdies are even longer that most think, so they NEED a good year end rally like last year. BUT the markets are bigger than them (I love it when I read someone say "the big boys this or that", tells me they don't have a clue and to stop wasting my time reading them) will do what IT want's, and always be right. So I'm keeping my short and will look to lighten up into any downdraft Monday, then look to re-enter short as I expect another retest of the highs. For a glimpse at the structural problems the US faces read the below commentary from here http://www.minyanville.com/ (a huge resource) which is a stroke of genius. Maybe the most important stock in the world (next to FNM) is Citigroup. The sponsership it enjoys is not helping this stock and fits with J Succo's comments. It should have made new highs but didn't. This tells me the S&P will struggle on it's way to 1250. Gotta love traders markets.

One edit, as I was writing this 25 went through @ 1170 so now I'm 25 short. Almost 20 points in 3 trading days, no one ever went broke taking a profit.

[Seshadri]

Merging Cycle Projector

Duane/Plumber,

When I tried to merge the Cycle Projector with the chart by holding Shift and dragging the study, for some reason it does not plot the majenta line (projection) on the chart but only the pivot projections are shown. Plumber, can you help clarify how you are able to do that on your charts? Thanks. I am an avid follower of your posts.

Sesh

[theplumber]

Re: Merging Cycle Projector

Originally posted by Seshadri
Duane/Plumber,

When I tried to merge the Cycle Projector with the chart by holding Shift and dragging the study, for some reason it does not plot the majenta line (projection) on the chart but only the pivot projections are shown. Plumber, can you help clarify how you are able to do that on your charts? Thanks. I am an avid follower of your posts.

Sesh

Your the 5th person to ask this, all I can say is contact [email protected]
I just use the software, sorry.

[theplumber]

I'm moving my stop for the remaining 25 short @ 1189 to 1188. The price action as well as this weeks cycles all point up . I saw no real aggressive selling so this says Friday was just speculation but any up move is suspect as there just isn't any selling. The move from Dec 2003 to Jan 2004 was the same way, no real buying, just no selling which makes shorts close and the tape drifts higher. How high? I'll find out if I'm stopped out. This sort of action is the reason I closed half Sunday night. Maybe the most important aspect to trading is risk management and working the trade is just that.

[theplumber]

before and after cycle projections for this week

[tolstoy]

theplumber

I am impressed by your skills. How do you see the market going forwards have we seen the top?

[its1111]

Plumber

On your weekly outlook it looks like you anchored right before the bottom of a low. As I recall Cris recommends anchoring I believe up to 20 bars back or a few bars after the low or high is made, but you went before the low was made.
My question is do you look at the cycle analyzer first to see if the cycles are hitting right and then do the projector, do you see if the projector highs and lows are hitting right in backtesting or how did you decide to anchor it where you did?
Happy Thanksgiving
Mark
PS
How is Hawaii?

[theplumber]

Originally posted by its1111
Plumber

On your weekly outlook it looks like you anchored right before the bottom of a low. As I recall Cris recommends anchoring I believe up to 20 bars back or a few bars after the low or high is made, but you went before the low was made.
My question is do you look at the cycle analyzer first to see if the cycles are hitting right and then do the projector, do you see if the projector highs and lows are hitting right in backtesting or how did you decide to anchor it where you did?
Happy Thanksgiving
Mark
PS
How is Hawaii?

On the weekly model I use to forecast the week I anchor it by the previous Fridays close. Is this what is recommended? No, but I get good consistent results and so I use this. Time series cyclical analysis has 2 componants, time and the series itself (which would be price in this case). The easiest way to get the most consistant results is to forecast from the series peaks and troughs. But I've found over the years that forecasting from specific time points can also yield consistantly good results, you just have to find the time frame and settings to fit the instrument you trade. For instance I find windowing functions of great use with $INDU daily. This isn't recommended by Divergence but the option is there right? Play with all the options and see for yourself. As for the analyser question, to me what I've done is to see exactly what cycles are present and then use this info to tweak the projector or XT models. Such as setting the max cycle size to half the largest cycle and analyser shows. So if the analyser shows the dominant cycle to be say 50 then I'll place the max cycle size to 25 (or a divisor to 50, doesn't matter) and I've see good results in tighter timings on 2 minute charts for ES. Or if I'm swing trading larger time frames set the min cycle size to maybe the 3rd largest dominant cycle according to the analyser. These settings I've just mentioned don't work with all instruments and time frames but when matched with the right instrument and time frame can yield very good results. I've taken anywhere from 5-10 hours playing with as many settings as I can to see exactly what any peice of software can do. This gives me great confidence to risk money with it. The chart below is anchored from the start of European trading 11/25 . You can see how remarkable it has been over 24 hour time periods to predict the market. It's not a recommended setting but works great consistantly and has made me money.

Who said I was in Hawaii?

[theplumber]

On the left is the 11/25 start of European trading 24 hour model and on the right is the 11/19 anchor point. Both hit todays reversal top exactly.

[theplumber]

Some observations on todays price action.

[theplumber]

I just exited my short @1182, some loud chatter about the MSFT payout this week. An interesting fractal if it plays out in the chart below. Even though the cycles are weaker for the S&P and NAZ, the DOW is still 200 points under where it should be right now for a top.

[theplumber]

Originally posted by theplumber
Some interesting info I came across last week.

From Jason Goepfert " The just released COT futures positions for bonds prelim data, the way I view it is now the most negative since March 2001, only exceeded by many weeks in 1998. Otherwise the most negative since the inception of data in 1986".

From Todd Harrison " Over the last week or so we've seen a gorilla buying a ton of far out-of-the-money Dec S&P 500 1215 calls- 10K today, 10K yesterday, and 10-15K 1250 calls every day last week. Not sure if it's a short hedge or it's vs "off board paper"."

From Brian Reynolds " The buying in Tresuries and corporates is reminiscent of the spring and summer 2003. The skeptical response of equity investors is also reminiscient of the spring and summer of 2003. The response of our equity contacts, both bulls and bears, is "What the heck are coporate investors looking at?" If you remember, stocks spent the second half of 2003 catching up to coporates"

And the screenshot below, enjoy.

Remember this from Sept 25? Another freaky friday coming up.

[luvette]

Hello Plumber,

find the cycle analyzer interesting would like to know which software package does it come with or is this an efs you had created, seems worth looking into.

Peter

[BakedWafer]

http://www.sr-analyst.com/cyclePack.htm

[theplumber]

One technique I've been using for the last couple months is a 24 hour 10 minute model. This is also a time based anchor point, the start of trade when GLOBEX opens back up (after the 15 minute shutdown, 15 minutes after the cash close). Another I use is the start of European trading, but I haven't found the right time frame to use yet, it's only correct 80% of the time using 5 minute time frame. This 10 minute has been very good as you can see from todays action.

On a trading note, the statistical odds of a positive month was/is huge, but a retrace of all the gains Dec 1 is VERY possible, ,maybe starting Friday. This has been a good pattern for December, new high ,after new high in November, the first few days then retrace (or even go negative for the month) then finish higher by a few percent. As always not advice.