Jack Hershey uses the offset between the INDU and YM as a leading indicator for ES which he has labeled as stretch and squeeze depending on which side of neutral (fair value) it is. I've looked at this at different times and dismissed it but have changed my mind after looking at the illustration he posted in his journal. You can see that they have set up YM over INDU and have a histogram of the difference below. You can see very clearly that there is a definite correlation at the turning points. I would like to set this up on my computer but do not want to get Tradestation. I am thinking that this could be done with Ensign or possibly Excel. Any chance someone could do this and share it with us programming illiterates.
Here is the illustration I am talking about. The arrows are mine. <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=1200895">
bump. I'm kind of suprised no one has commented on this as much interest as there seems to be on this forum in indicators. This looks like something with real potential, to me.
A very complete discussion of YM/ES squeeze was done earlier in the year. Did you take a look at: http://www.elitetrader.com/vb/showthread.php?s=&threadid=54894&perpage=6&pagenumber=434 A lot of good discussion on that thread and an Excel based tool that does much of what you would like if you are using IB.
For the premarket offset value go to indexarb.com it is easy to eyeball it also. I use the offest and the fact that I have to adjust it (four possible reasons) a little during the day. One thing that is for sure is that it "leads" about everthing by a good margin in terms of carving trades. If you look at the sweeps documentation and see the commentary on fine. You see that S/S plays a role. As you get used to having S/S on your display, it becomes natural to go up to the DOM stalagtites then to the DOM and its T&S to the right of it. Then a glance at the Tick charts, their volume displays etc for carving the turn. Attached is a back of a log sheet that goes through straightening out a fine detail of carving turns. aolng the top of the sheet is an important consideration. When an action is coming up (the S/S telegraphs it and the DOM. T&S and stalagtites all agree) you will be seeing at the top or bottom of the tick chart a Pattern (there are many). A three pair is being discussed. The circle with a three pair pattern is shown and A line goes to enter. Note the line and small circle around this line. "other considrations is the note.. Once you have a pattern and you have "other considerations" as described above. You use a market order to get the "best" tick pair in the pattern to ENTER. as it all works out you then are soon at wash (middle of three pair and as you exit the pattern you are making money. In the middle you see the "good news" illustration. What if the S?S does not continue to give you the appropriate STr or SQu, then you see that it is possible to get "bad news" (right top) and a wash is called for. BUT you can still hang in there anyways and NOT take the wash (washes have wasted som time sort of and you are used to making money all day long) You can let the trade go against you to the extend that you reverse taking as much as a two tick loss to "get on the right side" and then take three or four profits by several thythmic actions all synched to the S/S which is, as you noted dictating the rhythm. What is just as rhythmic as the S?S is the bouncing balls on the volume bars. The ball gives you the height at the end of the bar all through the formation of the bar. Here you "KNOW" the Gaussian action all the time as time passes. You also KNOW the formed bar part and the "gap" part between the formed and the ball. All of this emphasises the ebb and flow of "trades" and this is in comparison to the four games played on the DOM five levels of depth. Among them you see the "WALL" that is the translation stopper. This was a low volume, low volatility discussion. You can see in the middle of the page the -3 then the series of plus numbers. these are tick values that accumulate between each of your arrows (at last the punch line) The S/S is a 1 min thing so it is always moving. we have many ways of showing the action by changing the width and color of the bars. I also have and it is not shown anywhere, a clock that does a dwell time for each tick. We corrolate risk with the duration of the dwell. The office is an unusual place. It is operating with both stocks and commodities. Above you can see that we have the ability to lean forward as a stance that is not near bing hyper on one hand nor relaxed on the other. Patience is not part of the deal in any way. What is there in the space, and i mean with everyone and their looking at banks of screens is a feeling that we have a handle on things at all times and if there is money to be made we are making it. Leaving three ticks on the table in 45 minutes was a recent event. Today one of the day trades (a single hold) was used to "sweep" all the account cash into a stock; it nailed 12% for that play on something less than a thousand shares in the 40's. The trader was doing stocks and commodities simultaneously. This paradigm is focussed on just taking out of the market what is being affered all the time. there is just the consideration of "knowing' in NOW what is going on and being, always, on the right side of it. There is no entry exit orientation or attitude (the stock seems that way but it was just parking money for the day from 9:35 until it was time to shut down the get the weekend underway) but, rather, it is an orientation to holding and reversing as long as there is no risk in the space due to the lack of signal and only noise remaining in the space. Have a good weekend.
Thanks a lot for the comments Jack. I am a bit overwhelmed with information. It appears that you are looking at the market through a microscope. The illustration is a bit hard to read but I will work on it this weekend. Certainly very intriguing. Could you tell me what your looking for on the DOM "stalagtites" to confirm what you see on S/S? Ramora thanks for the link.
most of the time looking at the markets is a routine that leads to an action called "hold". There is no microscope involved for the vast amount of the day. As anyone watches the market, the common experience is that it is moving all of the time. The movement is where money is being made. That is what a person does most of the time: sit and make money under no or very low risk. how a person recognizes the situation and gets the job done is, very apparently, not obvious to a lot of people. There are two basic groups who know how to do this. Tape reading is just recognizing the group that I am not part of. I front run those people so they "push" me. Thus I am considered a "parasite" in financial terms. The main theme of observing the markets is attaining "sufficient" data sets and just using the sufficient data to match it with a conclusion. Luckily by having just so many things to look at and combine into data sets, you just have a finitie number of them. As in any type of set usage or theory, you have several very commonly used data sets. Some people are quite casual or lazy so they just use one or maybe three and do not see them very often. There is a name for these; I will look it up. I made up the elements of the sets by getting my screen display to show them. Statistically speaking, no one does this. It is the opposite of a microscope. It is having everything available and just looking in the right place at the right time. For most price movement the effort is quite simple. To make it simpler I suggest drills for practicing and debriefings for reviewing what was happening compared to what was traded. Taking a break is good to; that happens every night and your brain reorganizes what you have been through for streamlining your memory. you can see how repeated failure, the most common ET experience posted, is all reinforced as time goes by and people become mentally crippled. the failure rate is about 90% i am told. The monitoring set of data sets is finite and some data seets are used with great frequency. Matching this set is another set of "conclusions". The conclusions data set for most people is largely vacant and not growing as time passes. most people shut it down by "being right" about evertything they see and do not understand. the majority of ET posts exhibit statements by people who are using conclusions drawn from VERY limited partial sets of the conclusion set for trading markets. The type of trading whose name eludes me now is the most profound example. It has a great emphasis on risk management as an alternative to knowing the full conclusion finite set. So most of the time is spent matching conclusions to frequently reoccurring data sets that are "sufficient" for drawing a conclusion. The net effect of this repeated successful process (learning is a process) is called having skills. It is a non linear process which more closely relates to an exponential process moreso than the compound interest formula, so to speak. Repeating pairing data sets with their corresponding conclusions is a major clue to getting over the hump of making money. Once you have a conclusion, you match it with a decision. There are only five separate decisions in all of trading. 20 to 40 times a day you make a decision that leads to an action. I have gotten this (20 to 40 actions) to sink into ALL of my leading detractors. It is a criteria for being a leading detractor as a matter of fact. I, perhaps, should start a detractor training journal. Then they would know more about my plans for them. Generally speaking, I need foils who exhibit their ignorance of understanding what I am saying in specific areas at specific times. One of my outstanding examples is C L; he fits into the beginner airhead category. I am short on intermediates and so far no experts have shown up. So the four parts of the routine go from broad to very narrow as the sequence of the routine is cycled. No precision is required almost all of the time. It is hard to imagine for anyone who has chosen to not make money in the markets. In 6 and 1/2 hours there are only 20 to 40 times when you take an action in trading. All other times are spent completing the routine and deciding to "hold" (make more money) or be on the sidelines (rarely) by deciding to "wait". Most holds are a consequence of getting a "continue" on the sweeps chart. I definitely need a leading detractor in the sweeps category. I have no detractors that are personally trading and have a strategy that deals with "holding". All of the hold decisions form chains of time where a person is simply continuing to make money and not having to exercise precision for the vast amount of that time. What is the situation that does not let a person practice what I am suggesting. It is not knowing how the market works. so how daoes a person get to know how the market works. It is a process involving work. Google it and find out that there are no references to speak of. A short cut is to refer to the launch of the Global Positioning Glossary at the IBD MeetUp 14SEP06 by Richard Hoover; it is on cmatasia at the local web site. A glossary is not the major resource for the having the finite conclusion set BUT it is a place where you can learn how markets work by getting your personal questions answered by using a look up process. All citations have three aditional levels of consideration (Up down and sideways) and it is illustrated, interactive and continually interatively refined as a starter. there are links to practical examples of the successful use of the item under consideration. The team is using a conveyor belt appraoch to work in parallel with the writer's style guide to make its production more effective. The team is designed for 25 producer participants (See the approach of Christopher Lott* from the early 90's and the approach of Wikipedia, contemporarily). When the 20 to 40 actions are on the table, they do require precision. Since I am an EE from the vaccuum tube era, I am used to designing filters, trimmers, squelch, verniers, zero setting and fineness controls. The sweeps reflects this mentality. You only use what is required when conditions require it. the optimization of making money requires being in the market and also carving the turns of the market to leave little on the table. Any errors induce two losses: the loss of taking profits and the loss of not entering at the most propicious value. It is the putting example. The stalagtites play a role in this fine (vernier) adjustment. Most threaeds in ET have itbackwards as to what controls the movement of the market: the minority controls. A galnce at the five levels of the DOM shows the control and where the control begins and ends. This is an advanced beginner notion. I have snagged DOM shots showing all five sums on each side being as low as 700 each at about 2:00pm on a trading day. A few of you can guess why I took the shot. Ordinarily one side ot the other is smaller. Usually there is a long stalatite on each side. Data set elements: small side is direction of the trend (or travere more specifically), long bar on bid side is the limit of the current travese short, long bar on the ask is he limit of the traverse on the long side. This is just a glance to have a price Ball park and which team is at bat. Having that you move on to the other "fine" data elements you need for a data set to carry to analysis where you match it with one of the "conclusions" already available in your complete conclusion set. At some point in my life i moved from thinking about the four step routine to doing it in "sports memory". this compresses the mental sequence. When I worked at UCSC and subsequently my partner was the protege of Julian James when she was at Princeton. She and I wrote five books together before her tragic auto accident with a teenage drunk. I recommend readingjulian's seminal work on the bicameral mind. *Under MACD you can see the origin of the contemporary Values.
I recognize this one, it's 'build your own universe' part and of course you can build it any way you imagine it.