Hi Oddi No, not a Gann trader. I read some of his writings years ago. The 45 degree angle is so evident in markets, economies, art, music that I think he just based his whole theory on it. It is a firm basis to take the macro perspective on the path of price. A market's track that fluctuates around the 45 degree line can be relied on to continue, whether upward or downward, till the departure from it is too great - as when the trend ends and a new one begins. I find this behavior occurs across timeframes. Look at the 2000 to 2002 decline and then the rally off the 10/2002 low and its subsequent pullback into the 03/2003 low. Though steeper at times, the decline from 2000 returned "to the mean" of 45 degrees. The 2 lows in 2002 and 2003 set in place the basis for the upward 45 degree track. No, it's not perfect but it helps to keep the bullish move clear in your trading mind when the bearish noise is all around you. A peculiarity I have noticed is that when price rapidly deviates from the 45 degree track, it does return, but much more slowly and over a much longer period of time. Oppositional, the slow and steady departure usually will attempt to "rush back" to that track. I see this behavior in both up and down pointing 45 degree lines. I suppose the downward 45 degree line is actually a 315 degree line, eh? Good Trading and God bless. W. B. Busin
Timing Market Turns - 11/17/2005 Market Timing for Option Traders- long the SPX and NDX near-the-money Dec. calls Futures Traders- long the esZ5 Stock/Funds/Investors- remain long Update on the pullback or pause into the Wednesday time locus: It seems to have been a brief and shallow - almost TOO brief and shallow. Sometimes that happens in the midsection of a correction. So caution is urged for the next several trading days as we are NOT through all of the resistance levels that remain up to the previous highs of the SPX (1240's) and S&P futures (1250's). The caution would come into play if SPX does not take out the recent high (1238) and hold above it for at least 2 days on a closing basis. Then one might look for the potential for testing the 1226 level again. The next time locus arrives on Wednesday morning, the 23rd. We still project a low for that very bullish seasonal week. It may just be a higher low of some sort. Or, we may just muck around between the 1200 and 1240 levels till then. I know the above reads a bit on the muddy and murky side of clarity. Suffice it to say, patience and faith in the market always win out. Let corrections end when they want to end. Don't attempt run ahead of the train and end up as (rail)roadkill. We are still 100% long in our core positions. We took no hedging actions. Our daytrading positions are long both the Dow, SPX and now NDX also. Good Trading and God bless. W. B. Busin
Hi W. B. Busin! Thanks for sharing. Do you prefer to use time? Gann said that when time is out price will change. I am not good enough yet but is it not more of a combination? Price just has more options!?
Paperboy Only have a moment but for us, price and volume affirm time. We use numerous proprietary and public indicators to view trend and the changes that are constantly occurring across timeframes. Gann has a point perhaps, but the inverse is also true. The market knows where it's going and how it chooses its path to that destination. I've written this before, the market will tell you where it's going. It speaks so softly sometimes that you might have to lipread! ) Paperboy, if you don't learn bet size or money management first above everything, when you have capital to trade or invest, you'll wish you had when you have no money to manage. Trading is a game won by the tortoises, not the hares. Good Trading and God bless. W. B. Busin
Timing Market Turns 11/17/2005 An objective view of today: It was up across the indexes. 24 Dow stocks up 432 S&P 500 stocks up It would seem a bullish day. November is a very bullish month. Most broad indexes are at or above resistance of recent highs. Getting above those levels this month has important implications for next year. December is often a laconic time with occasional steep drops followed by year-end rallies. Getting above this year's highs should ignite a sharp and relentless move into month's end. However, the other side has a few items in its favour. Sentiment is Whoop! Whoop! BULLISH!. We might see a slashing pullback beginning tomorrow to flush out the weak handed young steers! ) How about this scene - new highs between now and Monday, then drop like a rock into Wednesday! Option trader professionals have all but left the pit and are headed to the squash courts. Distribution is nearly complete, imo. A word about crude- I thought I had mentioned crude going to $56-57 as a downward level. I could not find it in previous posts, but i didn't look closely. Nonetheless, it is there and due for a bounce. A potential low level, though not necessary, is $49. Either a sideways action will be sufficient to end the correction. The next move higher will surprise the media and most Americans. $92 oil and $4 gasoline is inevitable, imvhmo. The economy can handle it but the economic growth we have seen in the US is about ready for a breather, as they say. A year or so of slower paced growth will be a healthy thing. Again flushing weak hands and businesses with no reason for being out of the system. The economy's roommate is the government, both state and federal. Sometimes I wonder why Hollywood doesn't make a sitcom based on the various governments and agencies. Then I see the news and realize that the "events of the day" are funnier than their best writers could imagine. The only people around government dumber than politicians and government employees is the media that covers them. Well, I guess the people who believe the media without question might be dumber. Somehow the government has managed to let business get along despite the overburdening the little guy with paperwork and regulations. Not all regulations are bad. There's just too many of them. That is to say, it is hard to imagine the kind of growth and prosperity the US as a nation would be experiencing if there was less government and more commerce. In context, historically low unemployment, nearly 8 million jobs created since 9/11, productivity at sustained levels that were predicted by only one or two economists. Federal revenues so strong they can't even estimate the deficit (although it is a mite larger than it could be). So why is the current administration at such low numbers in the polls? CIA leak? No. North Korea? No. China and wal-mart? No. Iraq? No. Peace marches? No. So what is it? How can this be? It's those dumb people were allowed to band together and dominate "the conversation". The politicians against this administration's policies, the media which is always ready with a canister of kerosene to keep the flames rising, and the dumb public consumers of news. All of them did a great job. What did that general in New Orleans say to the press? "Stuck on stupid"? This event happens so often it defies reason. The vicious media cycle is only broken by strong truth telling. That is what has begun with Bush and Cheney and others pointing out that these little Emperors are in fact naked. WHY Have I written this monologue without reference to markets? Because it is the exact same human behavior I study and measure in the markets with price and volume. When everybody believes that they are totally correct, they will certainly be crushed by the weight of their assumptions. The facts are too brutal to say to someone's face when they express an opinion about economics, politics, opinion polls, markets. Why? Because they typically sound like they are repeating the six o'clock news. NOBODY WANTS TO DO THEIR OWN CRITICAL THINKING AND INVESTIGATIONS. My advice is to never argue with those people who still believe that a bear market is just around the corner. Just nod your head and throw out an occasional country style "heard that!" kind of response. It encourages them and they will be sure you agree with them. Then you will have found a gold mine of mostly wrong information about the market. You can then do the exact opposite blindly and have a very high percentage game to play. Blindly may be a mite overstated! Having seen my fair share of bull markets and bear markets, I have no apprehension about being bearish or bullish. It is just a plain fact that since the October 2002 lows we have been going upward and I don't expect it to stop for a very very long time. By the time this bull market is over, I'll be dead and dust, forgotten by the next generation, who will have convinced themselves that they are responsible for the gaudy opulence in which they thrive. But some day someone will pull out an old battered chart(probably across two pieces of paper) stretching from the ancient 1932 low forward to their day. They will look and perhaps they will also marvel at what the great women and men throughout the history of this country have wrought. The perpetual bull market lasting well over 100 years! Human behavior always tells the story of the culture, reflected in numbers of the culture's subsets: markets, economies and elections. These are the watermarks of liberty. I am grateful to be alive in these beautiful times. Good trading and God bless. W. B. Busin
Market Timing for 11/18/2005 Option Trading - We will be 100% in cash after the open. Futures Trading - Longs are covered and in cash. We will take a small short position after the opening when the opportunity presents. Investment (over 1 year trading focus)- We would stay long. We are only projecting a short term downward move. Although it may short in duration, it might well be a steep decline. We want to take advantage of that move. Most of the sentiment figures are in sell range and the volume indicators are approaching the "too much enthusiasm in too may people" level. We will take our profits and have a nice weekend. Still watching for the low on Wednesday morning or perhaps earlier near the close on Tuesday. In sum, we will be about 50% short Dow mini, SPX e-mini, and NDX mini. If it gets through a few support levels early on this morning, we will add. Good Trading and God bless. W. B. Busin
Market Timing 11/18/2005 Update: We are short as mentioned above. Stops in place. Let's see how far below the opening gaps they take the indexes. Good Trading and God bless. W. B. Busin
hi W.B. - what a nice cover on the longs, on the gap - i find your comments very insightful, i am looking forward to following your trades - i have a couple of more questions 1. around what levels are your stops for the current small short position in the futures 2. what sources do you use to gauge market sentiment 3. with respect to the put protection on your last long futures trade: i am trying to understand the mechanics / rationale a bit better - i am assuming you got long futures and then added long puts - so, if the market went down, then would the puts appreciate "more" (because of increased volatility..?) in relative terms than the losses on your long futures position - you would then sell your puts at a profit and hold the long futures so you can cover on a bounce? - that is just my guess, i'd like to know how it would actually work... 4. what would be a scenario that would set up a new long position for you to go for a break of the top / new leg up in the index futures? - for example, take last year's rally, end of year to the new highs.. - at what point did you get long then (if you did) and what was/would have been the setup? - or would you just wait for a breakout and see it hold, then get in rather than getting in ahead of it because we effectively have a year's long trading range in the indices. thanks for your feedback and all the best.
Fader, I thought you said a couple questions. 1. usually 2% -- this trade we just used price level, then took them off when volume started to decline before the low. I couldn't get a reliable sense for what kind of structure was developing down near the lows, so it seem prudent to leave the festivities early. Imo, it looks like an A wave downward toward midday then B back up. So maybe C downward chopping into Wednesday might be the track. We'll just get ready for Thanksgiving and wait for the Wednesday time locus. 2. vix, put call ratios, volume params, reading forums etc. 3. we were 100% long everything- ETF's, futures and call options on ETF's and indexes. For 3 to 6 month core positions, the ETF's assure that none of the totality of the specific move is missed. Futures and options allow for everything from day trading to swing trading. I don't use index funds because I can't get in or out when I want on a trade and I don't like fees and distributions. 4. I get long/short at time locus points due to low risk- they are like dead end streets. Last year I got long in early August. I traded in and out with some swings but the core stayed long till January 3rd. The indexes have been correcting since then until recently. Wednesday morning is the next minor time locus turn. There are several over the next few trading sessions. Wednesday holds sway for my purposes. Good Trading and God bless. W. B. Busin