Notes for December 30, 2011

[Billy]

Forum Clusters 111230.xlsx

Here are the last clusters for 2011. All multi-pivots will be changed next week and should provide more clarity for intermediate term trading purposes.
I will comment the new levels and answer yesterday’s questions before Tuesday’s opening.
All the shakeouts we’ve seen in both robots were facilitated by the very low volume and the absence of large players strategic commitments at this time of year. Our models are optimized for large players’ historical normal positioning and trading activity, not for short term window-dressing HFT activity in low amateurish volume. This joke will end soon and serious business will start again next week. Be ready and in great shape!
Billy

[mingpan.lam]

Hi Billy/Pascal,

In that case, do we have any indicator that shows big players are quiet?
A chart of total EV, total volume and average of this two statistics may help.

Cheers,

Ellis

[grems8544]

Hi Billy/Pascal,

In that case, do we have any indicator that shows big players are quiet?
A chart of total EV, total volume and average of this two statistics may help.

Cheers,

Ellis

Volume. Simply refer to average volume and see how much the daily volume is below the average.

My GGT system is showing volume -40 to -50% of the daily average volume:



If I'm not posting, then you can always check www.finviz.com:



The lack of volume of this magnitude should remove all doubt that the large players are enjoying the Christmas break. I think a separate indicator is not needed.

Regards,

pgd

[nickola.pazderic]

The price at which GDX trades today accords with long term horizontal support/resistance line. This will be resolved down or up. It will be interesting to see where the robot takes us when the heavy hitters are back from vacation.

[mingpan.lam]

Volume. Simply refer to average volume and see how much the daily volume is below the average.

My GGT system is showing volume -40 to -50% of the daily average volume:

Attachment 12090

If I'm not posting, then you can always check www.finviz.com:

Attachment 12091

The lack of volume of this magnitude should remove all doubt that the large players are enjoying the Christmas break. I think a separate indicator is not needed.

Regards,

pgd

Thanks Paul, the information is very useful !

[mingpan.lam]

Hi all,

Happy new year for you and your family!
Wish all of you have a happy trading year 2012.

Cheers,

Ellis

[Riskslayer]

Good analysis Paul.

Mean Reversion (trade against breakouts/breakdowns) vs. Trending Trading (trade with breakouts/breakdowns) strategies - when to apply which one?? Knowing this with certainty would be like having a printing press, and knowing this some of the time and knowing when you don't know/have an edge and thus not trading at those time would make one a great trader. CANSLIMers don't trade MR, most don't trade short and all most all sit out when they believe the market is not trending up. The robots try to blend the two (MR and trend trading). I trade with the robots and CANSLIM when its "on".

Holidays 2010 were good for CANSLIM/trend trading, and Paul's work shows MR worked better in holidays 2011. During Holidays 2011, most experienced CANSLIMers have been sitting in cash this holiday season (see M Scott, e.g.) - this is knowing when you don't know/have an edge. It is also helpful to support a decision to spend more time with the family/friends, but the holiday/seasonality is not driving the decision the market is, and if 2011 was like 2010 or perhaps trending up better, then many CANSLIMers would be glued to their monitors looking for set-ups and breakouts this holiday season.

I track volatility daily, and consistently at the end of the year (meaning about the last 2 weeks), volatility and volume both decrease. See the chart below. Consistently, each of the last 4 EOY holidays, IWM ATR/volatility has dropped into year end, as has volume (but, everyone knows that).

I would be cautious about assuming that MR strategies will work consistently on a profitable basis at the end of each year.



The chart of IWM looks very bullish to me b/c volatility has contracted significantly since the Aug-Oct 2011 breakdown, volatility contraction, and recent lower volume, but are the recent contractions in volatility and volume just seasonal? The chart below shows classic "coiling" in IWM or Darvis boxes with a 3 month Jul-Oct peak-trough of 30%, then contracting to 13% from early Oct into the end of Nov, then 6% from the beginning of Dec to mid-Dec, and finally 3 % in the last week or so. This is very "tight" price action and considered to be bullishly constructive.

We will find out next week, but it looks to me like we are nearing a breakout/breakdown from the "coiling" - the intermediate trend (marked by early Oct lows) appears to be up, so odds favor a breakout.

All my best for a happy and prosperous New Year to All!

Shawn

[adam ali]

Billy and Pascal,

I recall similar comments last year around the same time. Perhaps a "Proceed at Your Own Risk" warning should be emphasized in December, since the "normal" relationships don't appear to apply. With so few data points available I don't imagine Pascal can test this thesis, but Billy's years of experience is good enough for me (assuming he agrees).

[mingpan.lam]

An expensive lesson for me not to trade in Dec. Also agreed with Adam, a warning is a good idea, especially for some newbie, like me.

Cheers,

Ellis

[nickola.pazderic]

good to keep in mind the mind set necessary to trend trade