ER2 1 minute Close vs Volume last week

765 is key outlier and should serve as a s/r, with 775 as a minor s/r

The new litter

ER2 range for 1 minute bars last 3 days data

Spooks, Holloween masks and things that go bump in the night

What’s that I hear
In the quiet outside my window
Is it a spirit of the night
A thing without a light

Rustling in the tree
What does it have to do with me?
Is it a spirit of the night
Moving just beyond my sight

The night so still
It belies the chill
Of a tingle running
Up and down my spine

What difference would it be
If there is something in the tree
Something that’s nothing
A spirit in the night

Who is out on the branch
And taking a chance
What is the shade
And the color of a shadow?

Is it alone
Am I?
What could I ask it
That it could say?

No sound I hear
In my ear
It has no voice
For now

Turn out the light
Turn off my stare
Stop listening
For that which
Is and isn’t there.

What’s that I hear
In the quiet outside my window
Is it a spirit of the night
A thing without a light

ER2 1 minute Close vs Volume last 3 days

ER2 Close vs Volume

As usual s/r is at the outliers on the 1 minute volume.

$TICK bullish set up

Notice as the price moves off the lower bb, we had a $TICK divergence, a long set up

The price (ER2) then moved to the upper BB)

NYSE TICK distribution, Feb 15th to current

Notice the TICK distribution with the Zero TICK outlier on the curve.

Volume vs Price 1 minute, since June 8th

If you look at the outliers you find points of breakout, and support and resistance. These are somewhat repetitive so expecting to see them work again.

GREED DAY -- Rule of Thumb Critical Mass: The dynamic nature of Market events and price action

The Dynamic nature of the market can take the same news in two different time frames and contexts and do exactly opposite reactions to it.

This makes for an extended study of the market for those who want an unchanging black and white reading of the market.

Looking at this from Two commonly stated market motivations (not emotions) - fear and greed one could make each its own main dynamic.

For instance what is the main motivation of a market which goes down on bad news? Fear. What is a main motivation of a market that goes up on good news? Greed. Work it out for the security or market you are trading and trade with the sentiment and the dynamic of the market, not against it. Down on good news? Fear. Up on bad news? Greed. Conditions exist where news interacts with other news to create its own dynamic. Good news is a good GNP, but that could lead to rate hikes which is worse news. So news has to be in context. Employment up? (good for workers but bad for interest rate sensitive sectors of the market, where on its own good news is bad!) DIfferent interactions exist and have to be examined with some intelligence.

An example was todays market:

A premarket inflation report came in much lower than expected. While the market has generally been trading lower and in Fear (selling off good news on worries about interest rate hikes etc), this changed the dynamic. The market gapped up by the open and ended up much higher at the end of the day. While it is very possible to short this kind of a market, why not trade with it?

A rule of thumb could be to trade with the main motivation evident in the market.

Multichart simple chart, example, with Volume at Price, $TICK, volume BBs and 8,20 and 50sma

A Volume at Price Histogram giving a very nice snapshot of the market.

Multichart simple chart, example

I am checking out a new charting/testing vendor: Multicharts. This is an example of their charting. the link is: http://www.tssupport.com/products/multicharts/analytics/

The Shell Game

To understand the intentions of other market participants, an analogy can be made to the classic shell game.

Trading is much the same as a shell game, viewed from the point of view of someone who doesn't know how they are being worked.

From wikipedia:

"Play
The game requires three shells (thimbles, walnut shells, bottle caps, and even match boxes have been used), and a small, soft round ball, about the size of a pea, and often referred to as such. It can be played on almost any flat surface, but on the streets it is often seen played on a mat lying on the ground, or on a cardboard box. The man perpetrating the swindle (called the thimblerigger, operator, or shell man) begins the game by placing the pea under one of the shells, then quickly shuffles the shells around. Once done shuffling, the operator bets with his audience on the location of the pea. If played fairly, which it never is on the street, a player will win an equal amount bet, by correctly picking the shell containing the pea; otherwise, he/she loses the money. Even when played, without betting, as in when a magician performs the trick, the same sleight-of-hand techniques are utilized, so that the player does not, and cannot win, unless the operator wants them to win.
Viewing a game on the streets, by a confidence man, it would appear to the uninitiated, that the game has numerous players , but in reality, most of the persons standing around a game, are a part of the confidence gang and work for the operator. Operators prefer to swindle one victim at a time. The remaining "players" are collaborators, called shills, whose job is to pretend to play the game, and entice the victim into betting. They also can keep other pedestrians from crowding in and disrupting the bunko gangs action on the main player(victim). Much of the enticement involves personal insults between the operator and the victim. Once angry, the shill will "disclose" to the victim, how the game can be won. It is all a ruse to get the victim to place a large bet.

The operator often moves the shells in such a manner that it is obvious to all close observers where the pea is. He then touches all three shells, as if to move them to their proper places (asking his victims, "Is the pea here, here, or here?"). This is the crucial time when the pea gets its final position: the first shell he touches is always the one that everybody knows the pea to be under; he deftly removes the pea out from under the shell (known as the steal) and repositions it under another shell. This action is difficult to detect. Even knowing how to perform the trick will not help a viewer know where the pea is for certain.

When the operator has finished moving the shells around, he asks the player (victim) if they wish to bet on the play. If a player agrees, they have to place their money down, before they can point to a shell. They invariably choose the wrong "obvious" shell, and lose their money. The operator begins to insult his victim about their stupidity, which entices more "revenge" play, sometimes losing many times in a row.
If no victim wants to play, one of the shills may start the play in order to animate the victim. The shill will either lift a shell which is "obviously" wrong and will lose his money, or he lifts the "obvious" shell and wins. He wins because the operator touched all three shells again, moving the pea back to the "obvious" shell.
There are many variants of this scheme: sometimes the operator will not move the pea away from its "obvious" position by touching the three shells until a victim has handed over the money.
Occasionally, the first game will be played fairly for a lower amount, to entice the tourist to risk more money. Cheating will start with the following games. Sometimes repeat losers are kept in the game with an occasional win.
Sometimes a shill will place a finger on the "obvious" shell, as if to help the playing tourist and prevent any irregularities. However, the operator will still touch the three shells, the shill lifts the finger shortly at exactly the right time and the pea again wanders to another shell invisibly. Or, as explained above, the adjustment takes place after the money has been handed over.
The game should not be mistaken for an honest game. It is not possible for a victim to win, even if they know how the trick is worked, or even if they "accidentally" pick the shell that actually has the pea under it. Through very skilled sleight-of-hand, the operator can easily hide the pea, without the victim seeing. Any player who is suspected of understanding the trick, or does not place a bet and just wants to watch, will be quickly edged away from the table by the shills. The shell game set-up and lay-out is quick and simple, so that in the event of trouble, or if they are signaled that authorities are approaching, they can remove all traces of the game in seconds."

A full glass

Trying to process too much information while trading is the same as trying to fill a glass beyond the point it is full, the rest is wasted.

Try to get a concise useable set of data to use in making trades, or invest.

"Lost"

Ignoring visible (in your charts) and measurable phenomenon, like for instance a buy program signaled by a falling TRIN or a consistently high $TICK will require some very adept survival skills and money management compared to paying attention to where these are.

While it's entirely possible to make money fading these indicators, a trader is best served by knowing where he is, not by fantasizing some market that fits the trade he is in at the moment.

In survival training, when one can't match his own reality of where he is to what he actually sees - he is said to be lost.

A very cautious approach to survival is recommended for someone who is losing, or is falling out of sync or lost. Excuses and imagination aren't particularly helpful and can lead to even poor money management or disaster trades.

When you find yourself at odds with the market it is more important to obey all the risk control rules you put in and have to control loses, not less, in fact it is a high survival trait to pay extra close attention when life is more stressed and dire straights exist. Seeing is usually not the problem, realizing the potential for disaster and taking measured usual steps to avoid it is what is often ignored.

A potential exists in any programed completely mechanical trading system for this same sort of lostness, with the dynamic interaction of the market to be ignored, its what produces failed strategies more often than not, I suspect.

Lolly on Holiday!

Missing, Lost and Found, no reward offered

It is sad when they disappear, possibly off to the slaughter?

Trouble and "Poopy" just prior to adoption - adopted together

Who's painting what?

In any examples of trades given on this blog I am not trying to limit you to viewing your own trading to ONLY what is noted by me.

In fact several factors should determine every trade. You should have the trade cornered by having the most angles possible covered.

I am obviously not a professional trading advisor etc, and all blog posts are strictly for informational purposes only and are only intended to be a statement of my personal opinion.

What I mean by painting a trade into a corner is to leave it no way out but how you intend, as much as is practical.

Combining statistical analysis with current technical charts and patterns, fundamental information and risk control are all part of getting the most gains possible from your trading.

Taking one trade after the other that is a 50% chance with equal target and stop losses is a sure loser with slippage.

Example:

Take a trade on an impulse because of a volume spike, hold it despite the spike not holding price or not resulting in a winning trade, deciding you like it for longer term, after glancing at the 60 minute chart.

Here is the graphic of that trade:




Now obviously painting the trade into a corner would run more like this: By using all the information to hand include breadth and momentum indicators, charting patterns, news, other fundamentals, other market influences such as oil or commodities or currencies, volume, and correct leverage and risk control, and any other usual aide to trading covered in a trading plan you have tested.

Don't paint yourself into a corner with an incomplete strategy and trading plan, or impulsive trading.

ER2 Volume Bar

Volume bars signify breakouts or reversals, but often with a little follow up regardless, making for a scalp in the direction of the trend.

Lower BB to mid band (144) trade, 1 minute ER2

sisters at 3 weeks

 

3 weeks old

 

BB trading range trades

Buy at 144 on open, sell the rally failure at the upper BB, buy the lower bb, sell the upper etc,
likely to end the day around the midpoint of the 144-1sma 2.8 stand dev...

Drills To overuse, again and again till you can do the actions involved in your sleep and without fail

Putting together Blogs which explain specific practice drills to help traders become Traders:

http://trend1.blogspot.com/2006/01/waiting-for-love-of-god.html
http://trend1.blogspot.com/2005/09/first-thing.html
http://trend1.blogspot.com/2005/09/what-is-simple-about-these.html
http://trend1.blogspot.com/2005/09/daily-trading-review.html
http://trend1.blogspot.com/2005/09/being-right-about-everything-exercise.html
http://trend1.blogspot.com/2005/08/anticipation.html
http://trend1.blogspot.com/2005/08/ubiquitous-and-obligatory-10-rules.html
http://trend1.blogspot.com/2005/08/signals-time-intervals.html
http://trend1.blogspot.com/2005/08/breaking-it-down-into-smaller-parts.html
http://trend1.blogspot.com/2005/08/vital-role-of-repetition-in.html

Where the drill isn't explicitly stated it is still intended that you walk through or DO the action indicated in the blog.

Evolution of Math in America?

Last week I purchased a burger and fries at McDonalds for $3.58. The counter girl took my $4.00 and I pulled 8 cents from my pocket and gave it to her. She stood there, holding the nickel and 3 pennies. While looking at the screen on her register, I sensed her discomfort and tried to tell her to just give me two quarters, but she hailed the manager for help. While he tried to explain the transaction to her, she stood there and cried.

Why do I tell you this? Because of the evolution in teaching math since the 1950s......

Teaching Math In 1950: logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price. What is his profit?

Teaching Math In 1960: logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price, or $80. What is his profit?

Teaching Math In 1970: logger sells a truckload of lumber for $100. His cost of production is $80. Did he make a profit?

Teaching Math In 1980: logger sells a truckload of lumber for $100. His cost of production is $80 and his profit is $20 Your assignment: Underline the number 20.

Teaching Math In 1990: logger cuts down a beautiful forest because he is selfish and inconsiderate and cares nothing for the habitat of animals or the preservation of our woodlands. He does this so he can make a profit of $20. What do you think of this way of making a living? Topic for class participation after answ ering the question: How did the birds and squirrels feel as the logger cut down their homes? (There are no wrong answers.)

Teaching Math In 2006: Un ranchero vende una carretera de maderapara $100. El cuesto de la produccion era $80. Cuantos tortillas se puede comprar?

ER2 1 minute Close vs volume, 4 days gap present

This distribution would indicate a gap that should fill when strength is next shown, up to around 760.

The Negative distribution of ER2 closes vs the 144 1 minute, the last 4 market days since the market top

This shows just how badly skewed towards selling the market has been the last 4 days.
The negative values represent how far under the closing price the 144 sma is for each minute during regular trading hours the last 4 days. It gives a good idea how extreme the difference can get at the right end of the distribution (around 9 or 10)

Orders of magnitude, Time distributions, random perspectives

Orders of magnitude confront or evade our conception and understanding on a constant basis.

In Physics an attempt is made to conceptualize a order of magnitude many times smaller than our usual life experience. Such attempts have led in one fashion or another to the computing revolution of the last half of the last century and up till today. Also attempts have been made to understand the universe in it's entirety and from beginning to present.



Neither of these attempts however would be easily grasped by a normal person caught up in day to day life, without serious study, and thought.

An order of magnitude can consist of volume or time frame or speed or many things considered in trading or life by traders.

Where a trader gets an edge on others is in his choice and USE of an order of magnitude, having greater understanding of his market over time or insight into the ins and outs of the speed of his market or even volume connected to it.

In life an order of magnitude must be self aware to be useful. Albert Einstein is quoted as saying the same level of awareness which generates a problem cannot solve it, or possibly the same order of magnitude.

Similes abound. You can't see the forest for the trees, look at the big picture, penny wise and pound foolish, etc.

In developing a trading plan be sure to consider the order of magnitude of each aspect of it that you use. Be sure that using that time frame, or indciator or market or leverage work together and don't clash with each other or your own competence and understanding.

Just as a trader wishes to be exceptional, he must also have exceptional understanding of his approach and his edge be beyond a usual distribution of those in the market to obtain truely exceptional results.

Don't expect to split the atom with a knife or see the farthest reaches of the universe with a magnifying glass.

ER2 Vol vs close graphic

Two outliers high volume points mark solid and more recent s/r.

It looks a bit like a gap to fill down to around 778, and I would expect that to be an area of consolidation at some point.

In general ER2 being at an all time High, there is no climax in volume at the upper end and so no real cap exists on it as of now, looking at it from only the viewpoint of volume and close.

A first attempt at a fundamental profile using excel charting

If S1-S5 were data sets meant to represent market fundamental events such as earnings or news and horizontal 1-6 indicated a scale of bullishness with 1 being very bearish and 6 being very bullish, and vertical 1-6 being values of different events in volume and effect such as is described in earlier articles in this blog on CMI, then this would show a mixed batch of news.

Such a graphic could hold numerous data for any security and give an ongoing picture of how fundamentals or even technicals might influence price.

Above using somewhat random values shows a hypothetical security with a very bullish point and a balancing negative effect.

Someone should challenge this method by asking me to consider what they know affects a contract and have me draw up a chart of it.

Or I will come up with one myself, and see how it plays out.

I think this can be made to be useful for many different time frames.

Automatic drawing would require programming skills beyond my capability but might prove interesting. It could provide an ongoing graphic and total absolute value.

Continuing theory on Dynamic pricing of contracts and securities

This is an illustration of gravity, which could serve as a close analogy to market impact of news and fundamentals.

If one news item is dominant in the current market or relating to the contract or security the visualization of effect would look something like the above.

If more than one existed depending on the weight of the item other pulls on the price would exist. Timing of the release and effect on the market might be shown as follows:




You could draw a line which would indicate anything to the right of it would attract sellers anything to the left buyers, or graphically it could be plotted on a chart. Impacts weight and duration, expectancy, and other impacts come into play.

Interactive Dynamic Probability Table Theory

Probability tends to have a set distribution or put another way some things are more likely than others.

In situations where more than one probability can effect the eventual outcome or direction or the value of something relative to all variables, it could be said to be dynamic, or fluid as relates to the interaction and probabilities in total.

A Standard Deviation from the norm or one that occurs approximately 7 out of every 10 instances as well as the rest of the scale can be plotted on a chart in any number of ways, classically it is charted via Bell curve which looks like this:



Some deviations from the mean are extremely rare and are off to the right or left of this graphical example.

This brief blog is intended to lay the groundwork for understanding and graphical and a formula to represent interactive bell curves.

The point would be to better predict the actual effect of shocks and inefficiencies or news and general fundamentals as well as technical factors involved in security price moves.

Generally speaking I postulated that each piece of news or fundamental or technical information affected the overall price and value of a security. Depending on the size of the event and variation from the normal distribution as to size of each factor taken together determines price action.

I have several blogs on the earlier posts in archives regarding (CMI) this and how it would work.

To move this along one tiny bit in this blog taking two standard distributions of a small sample you could chart them in a number of different ways:

By itself:



With another data set:


or possibly with a better graphical interface than is available to me at the moment opposed or mirror imaged:


A data set for the last graphic might look like such:

1-3-9-27-7-4-2-1

12-5-2-1-4-6-9-14

Variance ER2 on daily - Daily High-Low Histogram

ER2 1 minute close vs volume 18 Apr mid day

Breakout as far as price goes on this chart would be around the 759 level, which would make it a price magnet if the contract got weak later today. Some back fill looks likely towards that price level.

144 sma ER2 today, with lower bb touch