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« A Little Summer Rally | Main | The Herd Leaves the Market to the 'Bots »

Thursday, July 08, 2010

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Chico

The subject of program trading and its impact on short-term wave patterns has come up several times recently. Here's an interesting article:

https://www.usatoday.com/money/markets/2010-07-09-wallstreetmachine08_CV_N.htm

DG

But rather than giving up, individual investors need to adjust to a world where computers run stocks, says Larry Harris, professor at the University of Southern California. At the very least, he says, investors should stop using market orders, which is the way most investors buy and sell stocks at the current market price. Instead, he says, investors must use limit orders, which specify a price to buy or sell and can protect them from computers going haywire during high volatility.

I almost never use anything but conditional orders. If your trading has some methodology behind it, I don't see how you couldn't produce your own algorithms and enter in your orders as "IF...THEN..." scenarios, where the "THEN" part is a market order. I'm completely indifferent as to whether humans or machines trigger the "IF" part of that logic. If my market order is executed .01 higher than the bid or offer was when the "IF" part was triggered, so be it. The average size of my stop from my entry price on the SPY is almost 2.65 points, so a penny or two is less than 1% slippage for me. With 1% at-risk per trade, that means all this computerization of trading has 1% of 1% impact on my P&L.

Livermore said that no man has a sound rationale for buying and selling stocks every single day and I agree. I think scalping is, as Livermore would call it, "a sucker play".

Whitebear

Well. I believe why QE1 has been ineffective is because banks have been keeping those bailed out money as extra reserves, earning interest from the FED in the mean time. The FED realized upfront what a disaster it would create if those bailed out money got lent out and would be multiplied instantly. That's why the FED is paying interest on those bailed out money to keep the money within its system. But, I don't think one can rule out the FED stop paying interest on the extra reserve, thus ending the incentives for the banks to keep the money within the closed system. One can never underestimate what a freightened FED is capable of doing.

katzo7

I enjoy your research, thanks for continually providing us with this type of analysis; excellent. You said, "The Government Bubble has burst. This is the last bubble, after housing (2005), stocks (2007) and commodities (2008)." You are right, this is the last bubble and probably for quite some time. But the real working model was initiated during the tech wreck period, a time when certain investor services tried out a process of inflating the market in a parabolic move, bringing in the public with individual accounts and IRAs, only to smash it down in the end, they positioning correctly to take advantage of the rampant greed. GS's spectacular profits are indicative of this success in working the model. Oil was also a training ground, at 147$ GS went short and issued a 200$ forecast. Look on a MONTH chart at that fall. While the process is the same, only the selection of flavor on the month changes. If you will look at the steepness of this first parabolic, ending in 2000, others somewhat pale in reference to it. All of the ills brought on to our country from the past, a historical past that goes back to 1970s on this chart, and in the world economy, will soon be rectified. As witnessed by the moves represented in this chart in comparison with the 70s and the 80s and into the early 90s, these type of recent moves are historically unprecedented. Parabolics always correct, down to where it commenced.

https://www.screencast.com/users/katzo7/folders/Jing/media/56744a6d-168c-44b7-915d-9a79217ee03f

Account Deleted

S&P 500 Support and resistance lines
https://niftychartsandpatterns.blogspot.com/2010/07/s-500-support-and-resistance-lines.html

Aramis-

Hey Yelnik, as Latvian I protest labeling Baltic countries as Greece. All three have one of the lowest GDP to debt ratios, and population is not spoiled by "free" public service.
As far as corruption, it is lower than Romania, Bulgaria, and Poland.

Grrrr...

Xuzi

Several days ago the bears tried to throw everything in the book at the market with the NY Times centerpiece article.

https://theartofcontrariantrading.blogspot.com/2010/07/nyt-highlights-bears.html

Worse market in 300 years, Dow below 1000 etc.

Once again, more Bear-market baloney!

Hockthefarm

Interesting take from Bill McLaren:

https://www.safehaven.com/article/17427/cnbc-squawkbox-europe

Maybe the time to get short is late August, early September.

Hock

Michael

"The subject of program trading and its impact on short-term wave patterns has come up several times recently. Here's an interesting article:

https://www.usatoday.com/money/markets/2010-07-09-wallstreetmachine08_CV_N.htm

Chico"

That's a pretty basic article written for the average USA Today reader and Joe Six-Pack.

Much of what the author is briefly highlighting in that article revolves around High Frequency Trading and how there are several ways to execute arbitrage strategies, as well as the technology that comes into play regarding quote and execution data.

He uses the word "Program Trading" when in all actuality that kind of trading has a much different definition and interpretation by buy or sell-side institutions on Wall Street.

"Program Trading" has been around since the mid-80's and simply means that brokers and portfolio managers are able to bid and offer large quantities of stock and entire portfolio's via a stroke of a button on a Sun Workstation.

An offshoot of this ability to execute are strategies involving stock-index arbitrage, where a broker executes a basket of stocks (S&P 500) vs the underlying futures contract for a client ( or their own proprietary account ) in an effort to seek alpha that is above the risk-free T-bill rate. Corporate America (GE, IBM, XOM, etc. ) used to do this all day long. It was an effective way for them to put their massive cash-flows to work and earn a return slightly above T-Bills or the CP rate.

At the end of the day, except for portfolios being swapped, sold, or bought with a stroke of a button on a workstation, most executions on the Street involve some sort of "facilitation" by the Broker, thus necessitating some sort of ARBITRAGE at work as the broker takes on the RISK of his client, in order to give the client what they want. Meanwhile, the broker must find a way to hedge this risk as he plays "hot potato" with the order. The tool that is usually used (besides rapid-fire execution ability)on the equity side are the S&P 500 futures contracts.

Mamma Boom Boom

So, ........are we going to fill those gaps while we're still young?

JT

Funny how Daneric is now getting nervous with his Primary (Bearish) count given that his count is the SAME (what else is new???) with Prechter/Hochbergs.

It's absolutely amazing how Daneric has any "followers" at all on his blog. The guy is CONSTANTLY talking out of BOTH sides of his mouth.

If he actually traded for a living, perhaps Elliott Wave Theory wouldn't be merely a "hobby" for him and he'd actually take a directional stand, one way, or another instead of talking out of both sides of his mouth.

Could go higher.
Could go lower.

Give me a break.

nspolar

JT ... Daneric?

Did the plug just get pulled?

ns

Hockthefarm

Folks:

What do you think of this 37 road map. See chart "headed for another fall".

What I like is the "economic era" similarities. Also if the 2 price curves were actually heater temperature profiles, I'd probably conclude we were talking about the same heater.

She was with big Jim, but leanin to the jack of hearts.

Hock

Hockthefarm

Wooopsy:

Here is the chart: Headed for another fall

https://tinyurl.com/25mhw95

Hock

Mamma Boom Boom

Hock, they just have the dark red in the wrong place. We're already past that low spot, in rally mode.

For some strange reason, we don't seem to see a lot of Roger these days. Hmm!

nspolar

Mama, are you IT and LT bullish?

I can't seem to tell.

What is the econ like in FL? I am a long long ways away from the L48.

ns

Mamma Boom Boom

nspolar ..... ok, I don't expect you to remember: bullish for the next couple months. LT bearish.

Hot, humid, rainy.

Hockthefarm

Mamma:

You could be right. I'm picking up a lot of uncertainty from among the Guru's lately. I think
the bears are afraid of exactly what you are proposing.

The uncertainty is enough to keep me parked for now, although I had been planning to get short by mid next week. If pushed, I'd say we rally into early September (McLaren's 950 low not withstanding).

Hock

nspolar

Mamma/Hock:

Cloest bears eh? Lots of those around these days, as you confirmed.

Where is Roger Doger?

Safe and sound in the polar bear den. Been keeping an eye on him cuz he is a bit depressed today. He needs a good juicy seal to chew on, to forget about those triangles.

Later. Back to gettin in winter's supply of goods.

ns

yelnick

Aramis, I feel your pain! The Baltics tend to be ignored. The guy who built this map probably remembered some financial problems out of Latvia in early 2009 - the second one to get into debt trouble after Iceland - and just generalized across the other two Baltics.

Roger D.

With 5 waves down on the Euro last night, I expect wave "e" (SPX) is finished or will finish topping at 1080-1090 area. Wave 3 should take us down to 750 in the next 30 days.

Roger D.

https://www.screencast.com/users/parisgnome/folders/Default/media/f9326c18-5080-48a5-8499-9371d3b63b5d

DG

With 5 waves down on the Euro last night, I expect wave "e" (SPX) is finished or will finish topping at 1080-1090 area. Wave 3 should take us down to 750 in the next 30 days.

Thankfully, you have no credibility left here whatsoever as far as I can tell from reading others' replies to you, so it hardly matters, but, Triangles can't be wave-2s.

https://www.neowave.com/qow/qow-archive-4.asp

Question:
Can wave-2 ever be a Triangle?
Answer:
Except for the initial "thrust" out of a Contracting Triangle, in general Triangles do not transfer much strength to the post-Triangular pattern. Therefore, if wave-2 is part of a standard, Trending Impulse pattern, it will NEVER occur as a Triangle. But, if part of a Terminal Impulse pattern, there is an outside chance wave-2 might form a Triangle, even though I do not remember ever seeing one. Finally, for reasons mentioned at the start of this paragraph, if wave-2 ever formed a Triangle within a Terminal Impulse, the odds are very high that Terminal would contain a 1st wave extension.

Wave Rust

Duncan,
ecri is down to -8.3 for week of july 2

wave rust

was short early this week then long for most of the week, but cash now. probably should be short but first waves up can sometimes be the last waves up too. :)

thinking bullish until july 28-29, maybe a 3 waver to 1160 or 1200 by aug 11th

we'll see. sure glad obama's pitching, he's gonna save us all. he's taking credit for the recovery now. chump. LOL

OracleLurker

Yelnick had it right when he compared the 2008 crash with the crash of '37. We are in '39 right now, although we just overshot the Nov '38 high significantly if you compare with the recent April high. Three more years of grinding lower to complete the mean reversion process seems about right - then, with the usual suspects calling for a continuation of the decline down to some ridiculous level such as Dow 400, the next 10-15 year bull market should begin. Fortunately my trading in no way depends on this kind of speculation.

yelnick

Wave, tnx for the ECRI update. Trending to go below 10 in first week of Aug. Perhaps we are in a wave 2 that is a large flat and in the c wave. Means wave 2 did not end at 1131 several weeks ago.

Could then go to 1131-1151 by aug4 and fall hard onto Oct. Timing coincides with recognition of double dip. Q2 GDP due about then plus July unemployment.

Roger D.

It is finished. All the subdivisions look to be complete in Autozone at Fridays close.

Roger D.

https://www.screencast.com/users/parisgnome/folders/Default/media/b9b2ea89-b107-4d33-a507-33611b3ea0e4

Roger D.

https://www.screencast.com/users/parisgnome/folders/Default/media/ac38ce9d-8c09-499d-ab65-d4b68d160901

https://www.screencast.com/users/parisgnome/folders/Default/media/8abf8dee-c17c-4017-94b5-debbfb8e3abe

Roger D.

philippine fred

anyone see the possibility of an expanded flat from the may 25th low, that puts the sp in c up now which possibly has one leg left but could complete monday prior to moving lower or last friday.

cant count the move down from the 21st as 5 waves only 3 which is why its implulsing back up in 5 now not 3. many stocks sport the same picture.

3% up or not china had an inside week so hardly bullish there while oil seems to be about to test the 68 bottom, will it hold I think holds the key to the size of the coming moves.

the tiger countries have been the last countries to reach peaks which is usual as they are a couple of yards behind usually and they appeared to complete yesterday.

philippine fred

as i dont live in the states it is difficult to gauge the economic reality, if there is 20%+ out of work then everyone must know lots of people out of work as if you know 50 people then 10 or more of them must be out of work.

it must seem like a club if it is so common...is the 20% number true?

Hockthefarm

nspolar:

"What's the econ like in Florida"

From Mish's board:

Charlie, a Florida vendor, had a few comments regarding vendor sales. From Charlie ...


Hello Mish,

"That's all folks" is correct and right on the money.

I have a vending business here in Florida. I service manufacturing and many general businesses. All are laying off workers. I have machines that were taking in 100.00 plus dollars a week that are now doing only 5.00 per week.

This drop off is now much worse than in autumn of 2008.

Mish, please tell people to save their money because hell is on the way.

Charlie
//

Hock

Roger D.

Autozone

This is has been the strongest stock and the pattern says, no more money, the well has run dry.

5 min

https://www.screencast.com/users/parisgnome/folders/Default/media/2b55671c-f375-4f25-999a-374b7d7b5dfd

Monthly

https://www.screencast.com/users/parisgnome/folders/Default/media/b9b2ea89-b107-4d33-a507-33611b3ea0e4

Roger

DG

This is has been the strongest stock and the pattern says, no more money, the well has run dry.

Like every chart you post, that's not a valid wave count. It's a Rorschach Test answering the question, "What does Roger D HOPE has been happening in this stock?"

I mean, are you seriously implying that the end of a "V" is an ABCDE? That the 1 of E of that ABCDE took more time than the remaining 4 waves combined? Ludicrous.

Elliott Wave counts CANNOT just be anything you want them to be.

Aristotle said that "There are many ways to miss the bullseye of a target, but only one way to hit it". My current count may not be hitting the bullseye, but I sure know that yours is missing it. You're not even at the outer ring.

Again, thankfully, you've cried "Wolf" so many times that everyone just seems bored with it.

What would be interesting to know to some extent is what you would consider proof that your count is wrong. If there is something, name it. If there isn't, then how is your wave count different from a religious conviction based on faith? I half-expect to see you walking the streets with a "Wave-iii of 3 is nigh" sandwich-board.

Eventhorizon

Philippine Fred,

I think answers to your question would suffer from selection bias, don't you?

Roger D.

DG,

Did you go short at Friday's close or are you planning to go short Monday? The risk reward is greater on the short side.

Forget about the labeling. To say that the that pattern is not at or near terminus is purely mental masturbation on your part.

Roger D.

nspolar

Roger, thanks for the autozone chart. Nice find. The 1,2,3,4, 5 ED (terminus triangle) for a Big Long 5th about to end is obviously there as a possibility. If it is the one, it is about to run dry.

It is charts like these that can be difference makers.

The iii of 1 of C down in progress for the indices is still a possibility. We know next week.

https://www.apartofny.com/wp-content/uploads/2010/07/apart-SPX-daily.png

My own chart labeling is a bit different for the i bottom, but at the same point here today.

ns

Chabazite

Hock - Here is the chart: Headed for another fall. Thought provoking article and thanks for posting it. Chab.

Roger D.

ns,

Thanks.

I pointed out Thursday that the Euro was topping and looks to have 1 down and a small wave 2 in progress. We might get a pop on Monday to finish some of these patterns in the minuette degree.

Is it finally time run out? Like you say,we will know soon enough. Of course the sell off in furtures after hours on Friday may have signaled the end.

Roger D

DG

Did you go short at Friday's close or are you planning to go short Monday? The risk reward is greater on the short side.

I do have a price/time combination that will get me short. More importantly, I have been LONG since 102.28 SPY and my stop is now up to 107.46. My one short trade of the week went for a 0.05 SPY point loss (less than 0.1%).

Forget about the labeling. To say that the that pattern is not at or near terminus is purely mental masturbation on your part.

As Livermore says, "Stock are never to high to begin buying or too low to begin selling". Is that pattern near the end? I don't know and I don't really care because I'm not trading that stock. The fact is that no one has a firm grasp on the current wave structure and the wave structure which has been working best for the past 6 weeks (see link below) calls for more upside from here.

https://yfrog.com/mespxdailyjuly2p

You can't just "ignore the labeling" because there are times when "the labeling" points to two different outcomes, depending on whose labeling you are following.

Again, what would falsify your wave count? I mean, other than the fact that it's wrong and I can clearly see it's wrong, although you can't. My wave count would be falsified if we went below the low of wave-.D to the extent that it became more than 1.618X of wave-.C. See, now that is how you come to an objective conclusion about the validity of your wave counts, by using hard and fast RULES, not subjective opinion.

nspolar

Roger, the best cycle analyst in the world stated at the end of this week there is little to no energy left in the current cycle ending AND that the one we're heading into has a LOT of negative energy to release, that will run well into 2011.

Right in line with what you have been saying.

Right in line with my own current EW and Cycle work.

It is not easy to time the tops exactly. Since I am no daytrader I do not try. It is meaningful to get 'the meat of the run'.

A chart later this weekend from the Prechter den and point of view that I have been following, that I think extremely telling of what is in store (negative energy). An American Icon type chart. It has some Prechter history to it. Prechter takes a lot of shit, rightfully so, but he is not always wrong. Maybe like the broken clock eh?

Who is in the market these days? I do not know for sure, but there have been a lot of reports that the small investors have left and/or continue to leave. Two interpretations, but one exceedingly bearish (just as the other is bullish). If the bearish view prevails, some big drops are gonna be seen during the next cycle. Big ones.

Later, supplies to get in store for the coming winter.

ns

Sage

DG,

"You can't just "ignore the labeling" because there are times when "the labeling" points to two different outcomes, depending on whose labeling you are following.

Again, what would falsify your wave count? I mean, other than the fact that it's wrong and I can clearly see it's wrong, although you can't. My wave count would be falsified if we went below the low of wave-.D to the extent that it became more than 1.618X of wave-.C. See, now that is how you come to an objective conclusion about the validity of your wave counts, by using hard and fast RULES, not subjective opinion."


You preface your opinion on false assumptions. As you know parabolic price charts that move in a vertical path are terminus. History proves that over and over through hundreds of years.
Didier Sornette has wrote books and papers on bubbles and financial collapse that follows.
You don't have to follow Elliot or anybody, a child could see that the chart will end at some point.
Have you ever heard of 3 drives to a top ,Bollinger bands all this and more is present on the weekly chart.
The upper Bollinger band has been pierced on the monthly chart, the death rattle for moves.
All this points to a major top in this stock soon within days hours minutes at every degree .Go ahead and buy it but a fool is soon parted from his money.

Roger D.

ns,

Seems like everything is lining up in the charts,yearly,monthy,daily,minute. Things take time and I don't have a crystal baal or tons of discipline. Thats why I don't trade,but why I use vehicles that aren't timing specific.

It has always been my contention that since the crash of the NASDQ in 2000 that we have been in a hybrid bull market,the advances have all been 3 waves.

There are many irregular B wave patterns and when time is up they will head down in a very powerful supercycle "A" wave down.

My current observation is that time has is about to run out. The Euro has topped,along with gold,commodities and equities.

Now it looks like gold will pop up on Monday,but I expect that will be the last hurrah.


We are in the final throws of a cemtral bank induced debt boom. Just like in 1929 large pools drove stocks up to extreme levels. The Fed along with their primary dealers have done the same. These prabolicas always collapse. This time will be no different, some natural laws always remain in effect. Time is the determing factor.

Roger D.

Gold


https://www.screencast.com/users/parisgnome/folders/Default/media/78aeee94-89a1-4d9c-b832-01d6db3c8f25

https://www.screencast.com/users/parisgnome/folders/Default/media/f5547ba2-4b40-4247-b2ba-5bf1c78aec7b

yelnick

Philippine Fred, yes, it could be we are still in wave 2 and it is breaking as a large irregular (expanded) flat. We would be in wave C and it could go at least back to the wave A high of 1131 if not to the 62% retrace of wave 1 down at 1151. If we count A as 1041 to 1131 or 90 pts, and say C started at 1010, at 1100 C=A and at 1155 C= 61.8% of A. If we get past 1086 or so this count will begin to rise in odds over the prime count that we are in wave ii of 3.

DG

As you know parabolic price charts that move in a vertical path are terminus. History proves that over and over through hundreds of years.

We aren't talking about "hundreds of years", we're talking about one specific wave count which follows exactly ZERO rules.

All this points to a major top in this stock soon within days hours minutes at every degree .Go ahead and buy it but a fool is soon parted from his money.

Maybe. I don't short things until AFTER they show weakness in a very specific and rule-driven way on the relevant timeframe, not BEFORE. You guys are constantly trying to front-run the market by calling top after top after top after top after top after top with absolutely no LOGIC behind your calls. Maybe one of these days you'll get it through your heads that THAT'S NOT HOW IT WORKS.

Steverod

I was reading the Daneric site and it sounds like what Gregmike and Tomjeff are saying. I need to check with Sampete though.

Roger D.

Excuse me,but I laughed my ass off when I looked at this 60 minute chart of GS,the "Vampire Squid". You think these guys know something?Did anybody yell fire yet??

Roger D.

https://www.screencast.com/users/parisgnome/folders/Default/media/fae65831-93c3-4228-928d-afdf38be540c

Roger D.

Btw, You can see who(GS) controls the market. They mask their selling very well. Except for the SEC announcement,they have been quietly unloading shares. Now the real "mark down" begins in earnest.

The smart money knows.

Roger D.

Chabazite

I thought this interview with Paul Krugman on Bloomberg might be of general interest. https://www.bloomberg.com/video/61333894/I found myself nodding in agreement with many of the problems he identified, but was somewhat less convinced by his proposed solution. His overall thrust was that 'the same amount again' needs to be spent on stimulus, despite very thin evidence that it has worked this time (or has worked in the past). A final comment to the the full interview was that the eventual solution to the 1930's depression was a massive public spending programme called WW2. From my limited knowledge, that is most probably correct. But WW2 was paid for in part at least by Britain, or should I say the entire British Empire, and our obligations - which we quite rightly kept - very nearly bankrupted us. In fact we have only just in recent times finished paying our financial debt. So, I am left wondering which Empire will be left paying for 50 years to come to combat the 1930's replay. PS! Note the excitement with which he says 'Bernanke wants to do more' ... Interesting times!!

Chabazite

Correction to link https://www.bloomberg.com/video/61333894

Wave Rust

Duncan

Pres. Barry 'Bagahammers' is readying his congressional flea circus for that kamikaze lame duck session this fall ,,,, which i have mentioned before.

it's going to get really sickening before it gets any better. Like I said, after August 24th, everyone will know the senate +/- 1 and the house +/-3.

you can pass alot of garbage with a whole bunch of 'dead men' walking the halls of congress.
---------------------------------

abc for me started on 6/8 or 6/9
a to 1031
b to 7/2
c to 1150 minimum, past 1160 it's 1200

this is going to be very fast if bearish
slow and steady if bullish

thinking fast after a 1 or 2 day chop back early this week.

wave rust

otoh,
xbd shows one beauty of textbook 5 wave correction into 7/2 low close ,,,, maybe that was all a P2 from April high ???? :)

Wave Rust

when asked about how will we know when a long term bottom is in,
Prechter responded with an answer about super negative sentiment ,,,, and "when only 20% of incumbents are left in Congress" ,,,,

i hope that includes Barry Bagahammers and Joe Biteme are gone too.

can't wait for that basketful of pardons in mid-january 2013.

wave rust

meanwhile our people are a 'dont ask, dont tell, don't shoot' war in afghanistan.

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