This post together with Spyder's video is really helpful, thanks. I recall Jack used to monitor str/squ "flapping" by overlaying INDU on the YM 2 minute chart - can this be done in Quotetracker/IB in any useful way?
In QCharts, You can quickly overlay a symbol on a chart by holding down Ctrl and drag-n-drop the symbol into a chart. <img src=http://share.esignal.com/ContentRoot/Jay%20Frank%20Upload/For%20Community%20Posts/QC_SymSearchOverlay.gif>
Right click in the title bar of the INDU chart and the bottom most option is translucent > click that and then you can set the translucency by using the slider.... Then just put the chart of YM behind it Regards
I have one question regarding STR/SQW: When looking at yesterday's FOMC action (thanks Spyder, after reading your link I made this indicator right) I noticed not only switch from -2 -> +2 which indicated a reversal, but also a huge extreme up spike to 20+ area which also accompanied a strong reversal. In the last case waiting for it to go below -2 would miss most of the move, so the question is: are these super huge spikes in Str/Sqw also can provide some reversal clues aside from -2/+2 lines?
Very keen observation and it is an advanced item. So let me preface this by saying that FOR ME, extreme spikes are actionable items assuming there is no data freeze issues. On FOMC, I am inclined to STR/SQU my way through the announcement simply because the STR/SQU signal has a very high signal to noise ratio. We know this because our noise is in +2 to -2. Readings like +5, +10, +15, +20 are very extreme and thus extremely strong signals. As a result, I regard STR/SQU over my trendlines and ride the STR/SQU action as long as the signal to noise ratio is strong...
I'll try to answer this. Long and sustained (value staying there a long time) is better than short and (more) neutral. The spikes is what is all is about. The only thing that matters is what the value is at a certain moment. It doesn't matter where the bar "closes" etc. So it's important not to confuse them with normal price bars. So for example. We have strong stretch value (+6) and price goes up. Then str/sq value goes to strong squeeze (-6). Then we reverse (if we still live in the same bar on ES). If str/sq moves from stretch to neutral then this is not significant. From my observarion on moves like this if str/sq moves from +10 to -3 then this is not significant either. A move from +10 to -8 is. If str/sq has been neutral all the time and suddenly moves from +1 to -3 and stays there a little while then this is significant. So it's all relative. When the bar is over we move to bar-to-bar tools again (eg PRV, YM, tapes). So if we have a strong bar up on high stretch values and the next bar show some retracement (not on incr. volume) and moderate squeeze values then this is nothing to worry about. Str/sq does give false alarm, you just have to know when to look at it. (action moments) Strong values are very important. BTW I do believe that smart money tends to move more (meaning smart players take action) after fomc moments and other reports. But this is just from observing a few months. regards, Ivo
Thanks for explanations makosgu and Ivob. I have two more questions: is str/sqw also as useful for NFP as it is for FOMC? And the second is what time point do you use before beginning of the day to calculate premium offset?
Yes, excellent commentary Ivob... NFP??? I just use indexarb.com's values and then go from there. Ideally, you would use the front-end of a zero-coupon yield curve and bootstrap the exact time maturity for the futures in order to back out a fair value that includes divident payments. However, that is overkill... So indexarb.com is good enough and I adjust until I arrive at a neutralized value that works.
By NFP I meant jobs report (1st Friday of each month). Will look at indexarb for this info. Thanks Janis
makosgu: When using indexarb.com do you use "Fair Value" from the table on the main page (it's 38.79 for today)?