Is Void A Good Support? - August 19, 2011

[Billy]

Forum Clusters 110819.xlsx

The robot pages are automatically generated as soon as all the output computations by the robot engine are delivered. Today’s IWM robot page still shows the original robot outputs but is forced manually to stay in cash. Starting on Monday, we expect to have finished updating the robot engine with the new rules and the IWM robot page will be adapted accordingly.

The new rules are set as follows to initiate a new trade:

1. Buy when LT > -0.75% while ST > 1%
2. Short when LT < -2% or LT < -0.75% while ST < -2%
3. Stay neutral any other time

Today’s settings are LT edge = -0.41% and ST edge = +0.42%.
Therefore the new robot would also be staying in cash and not looking to enter any position.

From a multi-pivot perspective, all I can say today is that YS1 (64.40) is likely to be retested soon and should better hold as support, otherwise floor-level based algorithms are most likely to precipitate hard selling. Void (below 64.40) is normally not a very good long term support! If you absolutely want to play the very weak buy edge from the old robot, don’t pay more than the 1:3 RR pivots buy entry of 65.23. You’ll be on your own with your stop and risk management, so determine your comfort level before planning any trade.



The GDX is holding very well compared to the rest of the market and provides some action while the IWM robot is asleep. It has been trading between its 2 first support and resistance clusters all week long and the initial position remains in the green. A new entry today doesn’t offer any LT/ST edge, and I would wait until a strong signal is issued before adding to the initial position.
Billy

[Timothy Clontz]

Crystal clear -- and scary as heck!

[Pascal]

We put the robot to sleep on August 2 mainly because there were large conflicting situations between short term and long term edges. These were the largest since 2007 and hence, we jusdged that the IWM Robot was out of the statistical range for which it had been set.

The divergence in ST/LT settings is shown by the arrows in the figure below. You can see at the right of the figure that we are back into a normal startistical range now.



Below I have shown using red stars the different LT/ST combinations of settings since August 2. The "old" robot would have been victim of push/pull trades.



The new robot would have stayed in cash since August 2, waiting for a strong setting.

[ernsttanaka]

Billy,

I am under the impression that Cum Tick is not falling apart during the last two days.

But I am not an expert.

Can you give your view on the Cum Tick of the last trading days.

Thanks,

Ernst

[Billy]

Billy,

I am under the impression that Cum Tick is not falling apart during the last two days.

But I am not an expert.

Can you give your view on the Cum Tick of the last trading days.

Thanks,

Ernst

Ernst,

It remains the best indicator for discretionary trading. Here's a 2-week chart. Buying the positive divergence on August 10, after the Fed announcement, above the half-day average was the smartest of all moves. It also triggered around the 1:3 pivot RR entry lilit of 65.23, same as today.

Sell signals were clear on August 16 and 17 when cumulative TICK repeatedly flattened out and broke below the half-day and full-day averages. The signals also occured at the 1:3 pivot RR short entry limit of 70.81on those days.
That's all you needed to watch for making a fortune in TNA and then TZA : cum TICK and the optimal 1:3 RR entries.

Today there is no divergence or signal to cover the shorts so far. If the indicator starts rising above the averages near the close, covering the shorts and taking a long entry around 65.23 seems the right thing to do for the short term.
Billy

[Timothy Clontz]

Attachment 9952
making a fortune in TNA and then TZA

Billy

Sounds like a job for a Robot... ;-)

Looking forward to actually making money for a change. Even my best model is simply losing slower than the S&P.

A pyrrhic victory, at best...

[Billy]

Sounds like a job for a Robot... ;-)

Looking forward to actually making money for a change. Even my best model is simply losing slower than the S&P.

A pyrrhic victory, at best...

Tim,
I think it is working now because HFT cannot hide their footprints in the TICK. Also, all equities are back at record high level of correlation, which multiplies the impact on the indexes. Add the higher volatility of small caps to the elevated overall market volatility and you have an explosive cocktail for short term traders with solid guts!

In "standard" market conditions, cum Tick can help fine-tuning the timing of entries, but can not surpass 20 DMF for capturing long term trends commitments by large players.
Billy