Thanks Mav, Regarding the meaning of a number line confirming ... my understanding is that a NL confirmation does not necessarily say anything about the given market's trend (however you define that) but rather means that there is a confirmation of underlying strength/weakness in the given market. If that an accurate interpretation?
Correct. So for example if AAPL confirmed it might mean that the overall market might trend lower over the next month but AAPL trades sideways. It shows that AAPL should hold up better than the overall market.
This has been quite a move in the greenback... also noteworthy that crude has still powered higher in spite of it.
Hello Mav, In several posts such as this one you've alluded to finding spreads by looking for pairs where one has ACD strength (e.g., confirmed weekly up) and one has ACD weakness (e.g., confirmed weekly down). Some examples you've shown are CL/HG and USO/XLF. When you look at spread candidates where there is both ACD-defined strength and ACD-defined weakness are you also looking to ensure that they "make sense". For example, CL/HG at first glance doesn't seem (at least to me) like a spread that is based on spread-worthy factors other than they are displaying opposing strength/weakness. Am trying to get a feel as to how much a spread making sense plays into your spread composition. For example, might you spread AAPL and GM if they started to show opposing levels of ACD strength/weakness? Thanks
Almost all assets are tied together somehow. I'm always desperate to find anything that is not correlated to growth rates, those are unicorns. Right now the only thing I can find is bitcoin. Everything else is tied to GDP or interest rates in one form or another. Gold~interest rates. Copper~growth. Grains~growth. Natural gas is a semi-unicorn because it's very weather dependent. So whatever you are spreading, chances are it's tied to economic growth rates somehow.
Hello Mav, Thanks for the insight. So, if you identified two markets, one exhibiting ACD strength and the other weakness is there any criteria that would keep you from spreading them? For example, if NG and GOOG (am trying to think up something unusual) were showing strength/weakness would you consider an NG-GOOG spread? You see what I'm getting at. Your relative value posts almost sound like your saying if one is strong and the other is weak (ACD-wise) then spread em ... though I don't really think you are ... are you?
You might be over complicating this. I try to stay neutral in my trading in general. So if get too long or too short, I look to lay off risk somewhere. That's what allows me to lever up. Copper and natty are not a good fit but let's say copper is strong and FB is weak. I'm not necessarily putting this on simultaneously as a one position. I might already be long FB and so I'm adding the short copper just to pull the risk down.
I've been reading through your posts on this thread and when I hear someone talk about a spread I naturally think of something that is entered and exited at the same time and where relative (dollar, vol) sizing is taken into account. I was using your examples to help and guide my thinking re spread selection (i.e., how would Mav pick a spread) and some of your past examples seem to be situations with opposite ACD strength and not truly things that jumped out at me as true spreads. Thanks for the feedback.
66 pages on the greater fool theory which is alive and well! https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066