Adventures in the garden of good and evil

Discussion in 'Journals' started by ljyoung, May 30, 2008.

  1. To begin, a couple of cuts from 'Surrealistic Pillow' - one of the seminal albums from the summer of love and I think highly appropriate to ET where love and understanding abound:

    I will recount in this thread what I use to trade in the futures market and which at present involves day trading of ES. The Hershey method is at the core of what I use but it is not the only thing. Let's call my method the lj variant of the John T. Hershey method (JHM).

    At this point in the day (12:15-12:30 EDT), a competent practitioner of JHM should be 15-20 points/contract in the black. Which is to say after the first 30 minutes of 2-3 points/5 min high overlap ES bars there have been 3 turns amounting to about 15-20 points. This excludes a front run from the premarket which would have netted 3-4 points. This also excludes profitably trading that first 30 minutes or so.

    I am not yet a competent practitioner of JHM but will be soon, I believe. When I feel the time is right I will post trades but I will not call trades. Livermore used to lock himself in a room during market hours and did so for a reason (which might become evident in the future).

    To use JHM most effectively you must be able to reverse but you don't have to do this to make money with it. I'm working on the reversal thingy at the moment. cnms2 has remarked that the nice thing about staying in the market is that you don't have to be concerned about the entry-exit phenom. However as always, when in doubt, bail.

    My reason for begining this exercise is by way of payback to JH for his thoughts and efforts. I am a scientist by training and his method, IMO, is the closest thing to science I've seen here or on T2W, that somewhat more civilized venue across the pond.

    The posts here will be intermittent. This is not a 'how to do it' but rather a 'how I do it' kind o' thing.



    BTW for a psychedelic experience, drop some acid and play the tunes concurrently. If things get a little messy ask Timmy for some help or better yet, just stay away from the acid and checkout PeeWee:
  2. A clarification of a point I made on another thread concerning the use of indicators after a morning gap. The workaround stands - just come in from the overnight. With respect to the size of the gap and price action having effects on the time at which synchrony between the ON and RTH indicators occurs, there appear to be two categories of effects.

    For stochastics like the 5,2,3 or the 14,1,3 synchrony will occur between the ON and RTH when the longest time interval has passed. So for a 5 min ES with a 14,1,3 stoch, synchrony occurs at about 70 minutes into RTH. This is is because once the gap is 'passed by' there is no further influence of that price change. Stochastics have only non-averaged price components within the operator-determined range.

    EMA's and MACD's on the other hand can be influenced beyond the preset range, by the size of the gap and 'price action' because of the way the MACD is calculated. For example today the 5 min ES 5,13,6 MACD was not synchronized till about 12:25 which is far past the expected 65 minutes. I have not done any detailed calculations to see what specific relations are present amongst price action, gap size and time till synchrony but one needs to be aware of the potential problem. IMO the best way around it is to use the ON data and/or avoid using the RTH data at all unless there's a split opening or by dint of synchrony of a dual feed [one with ON data and one with RTH data].

    So as not to set off a blizzard of "all indicators lag" comments, please be aware that I am aware that indicators lag the currently observable 'last price' but depending on how one uses indicators, one can arrive at a situation where one is not lagging that last price by very much, if at all.


    A little something for those boyz over on the currently most obnoxious thread:
  3. Today YM pierced and filled an unusual gap at 12354-12359 on large volume with a close above the upper gap margin. The lower gap pole wasn't pierced. The ES counterpart lies at 1336.00-1337.25, some 41 points from todays RTH close.:eek:

  4. On the other hand, NYSE $TRIN improved, NYSE and NASDAQ A/D ratios improved, CBOT P/C ratios were just slightly up and the VIX increase was not nearly so much as yesterday's. Further there was the anticipated day 1 dump after the $INDU "Down Friday-Down Monday" pair. So as Al Farley says today in his HRE snippet:

    Gravity is building and favoring lower prices on all indices in the days ahead. But, as usual in this volatile 2008 market, expect whipsaws and fakeouts until everything is pointed in the same direction.

    No trader with half a brain tries to predict what the market is going to do but that does not mean one's mind should be closed to appreciating what it has just done.

  5. A followup on the gap thingy. Again the gap was pierced, this time on larger volume with a lower close but not as deeply . So as with yesterday's observation, this remains back-burner stuff. It is very much a coarse PA kind o'thing and should be treated as such.

    On the other hand what an incredible call (NOT!!) on the divergence between the selloff yesterday and the market sentiment indicators intimating a runup today. Well at least until noon or so when the selloff began but then .... And that's the problem with stuff like soft sentiment indicators for a trader. They aren't worth the paper they are written on. I never use them to make decisions intraday. So why bother collecting the data. Bad habit I suppose. Even if the 'indication' is correct, there remains the problem of timing as in when do you enter for the expected runup and when do you exit. Make no doubt that some financial services character makes a living peddling stuff like this.

    As for Alan Farley's comments, I must admit I always look at what he has to say each day but again treat him as a soft indicator. Why bother with Farley? His "Master Swing Trader" was one of the first technical books I bought and like any newb expected to have the secrets of the market revealed within its pages and rather quickly I might add. Such was not the case (surprise, surprise) but there is a lot of useful info about general aspects of the market and in particular I like his section on "Time and the Market".

    In and out a couple of times today for a couple of points but this will get better. It's not so trivial as my Jewish quantum chemist friend used to say. I particularly like the snappy little "5-6 points per 20-30 seconds" runs near the end of the day. Nice to be on the right side of those.

  6. There have been multiple disconnects between the smart$ (all together say 'YM') and ES over the past little while and there's yet another one this AM. What with all the 'excitement' surrounding this AM's JC, the YM failed to breach yesterday's ID high (NQ likewise), while ES did. This gives a different flavour to the day and let's see how different.

  7. ES is pressing the point - it's leading YM!! When will the big screwjob happen? Will there even be a YM response? YM has breached yesterday's high. Reset those channels.

  8. This seems appropriate:

    “When I was a boy of 14, my father was so ignorant, I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much the old man had learned in seven years.”
    -Mark Twain

    There's a lot of 'entwining' going on and ES continues to press. Say 'one one thousand'. Each syllable = 250 msec. Cut a syllable in half and you have 125 msec. I'm that close to 'it' but not yet and I wonder why.


    BTW, IMO the AM IBGS's very more often than not, don't get voided.
  9. It's nap time. BTW, I'm not the old man. YM refused to pierce that 12551 gap, at least for now. ES of course did - 1393.50 to 1394.75, the magical Fib50, which to JHM people is an interesting (or not) afterthought. ES entwining has ended after that 'little' FTT. So now, as always, we just wait and see what Ms. Market is offering.

  10. Has the revenge of YM begun or is this just a feint? Or was the whole thing a feint? I think most probably not. Minimally competent JHM traders would have been short around 1:44 or so. Looks like an EW wave 2 about now but ya never (well rarely then) know with them EW's because it could be a wave 4.

    #10     Jun 5, 2008