ES Journal Archive (2006 - 2008)
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FOMC target 1550 still looking good.
The psychology of the large money pool. If you really look at what drives price movement its psychology of the largest money pools.
The largest money pools just by their nature, cause huge price swings upon entry and exit. Thus its hard for them to make money unless price trends for a extended period of time. Why go against historical tendencies, when forces such as liquidity are driving the world markets.
So looking at the world a lot of favorable factors are coming into play.
1) election year approaching
2) liquidity
3) coming out of a pessimistic period 911/dot.com bust
4) new economies coming online
5) interest rates still relatively low
6) mergers and acquisitions
7) daily dollar swings on momentum stocks still minimal
8) psychology still undecided about equities(wall of worry)
9) shoeshine boy not talking about stocks yet
So what do the large money pools do, they just stay long and rollover year to year month to month. Till all the above come to an end. I will be rollingover contract month to contract month a long position in spooz till a rollover registers two periods of loss. Its the most effortless method.
The largest money pools just by their nature, cause huge price swings upon entry and exit. Thus its hard for them to make money unless price trends for a extended period of time. Why go against historical tendencies, when forces such as liquidity are driving the world markets.
So looking at the world a lot of favorable factors are coming into play.
1) election year approaching
2) liquidity
3) coming out of a pessimistic period 911/dot.com bust
4) new economies coming online
5) interest rates still relatively low
6) mergers and acquisitions
7) daily dollar swings on momentum stocks still minimal
8) psychology still undecided about equities(wall of worry)
9) shoeshine boy not talking about stocks yet
So what do the large money pools do, they just stay long and rollover year to year month to month. Till all the above come to an end. I will be rollingover contract month to contract month a long position in spooz till a rollover registers two periods of loss. Its the most effortless method.
These guys don't talk about the absolute decline but according to them, buying at the close of the 3rd down day results in a short term rally 84% of the time since 1995. Of course with hindsight, the signal on Feb 23rd this year woulda been a bit painful.
Number of trades: 102
Percent correct: 84.31%
Total S&P points gained: 1013.90
Average holding period/trade: 5.76 days
http://www.tradingmarkets.com/.site/stocks/commentary/editorial/The-Improved-R2-Strategy.cfm
large money flows work in concert, if the psychology of large money flows conflicted, prices would move sideways. Since the conflicting orders would match each other.
when price slippage occurs in a given direction beyond the average, it means large money flows are working in concert. In a given system, the populace or masses that make trading decisions, the psychology of the individual participants is what dictates whether money is made or not. If a individual investor can model the behavior patterns of the large money flows, it becomes an edge.
so whether you believe it or not, the bull market started when the Dow broke to new highs. It was a confirming signal for chartists, and when the SP500 was challenging its highs, that also was another signal that the bull market has legs. The daily fluctuations or fear and greed overall the trend is up. The fear of rising interest rates, is evident only in the near sighted ones. Interest rates would have to offer much higher yields for money flows to shift the traditional allocation ratios between credit and equities. After paying taxes the return on your money is irrelevant. And credit markets are used to just park money.
there is great deal of growth still left in many of the BRIC countries, a lot of the things we take granted for in the developed world, the developing countries are just implementing now. In terms of infrastructure, communications, energy extraction, consumer service industry.
so I wouldn't call this a top. As a investor/trader the things we have to worry about is:
1) account size
2) leverage
3) daily dollar fluctuation of account
4) noncorrelated asset classes(diversification)
5) long term /weekly trend
if you find that your losing sleep at night, then your leverage is too high for you account size. I think back to the periods of late 80's and 90's and the fear and greed short term movements in the markets to give me a reference point where we are in the markets.
so we have two timing events coming up within 2weeks, FOMC and the week after that nonfarm payrolls. Just when everyone is getting ready to throw in the towel on the bond market. The BLS will come up with a string of weak numbers. Fridays consumer confidence was weak. And it will be the spring board to new highs on SP500, when the bond market fails to make further losses.
So the large money pools if they are short, they need to remove the risk from these two timing points. Since a discount below the previous high on the SP500 will become a long term price point. Once price slips above that point and the longer it stays above it, it fuels further gains and price moves away. So your short positions will have a hard time materializing profits. And thats where the risk lies. Plus the list of events and conditions posted above, provide similar favorable historical environment.
chris
when price slippage occurs in a given direction beyond the average, it means large money flows are working in concert. In a given system, the populace or masses that make trading decisions, the psychology of the individual participants is what dictates whether money is made or not. If a individual investor can model the behavior patterns of the large money flows, it becomes an edge.
so whether you believe it or not, the bull market started when the Dow broke to new highs. It was a confirming signal for chartists, and when the SP500 was challenging its highs, that also was another signal that the bull market has legs. The daily fluctuations or fear and greed overall the trend is up. The fear of rising interest rates, is evident only in the near sighted ones. Interest rates would have to offer much higher yields for money flows to shift the traditional allocation ratios between credit and equities. After paying taxes the return on your money is irrelevant. And credit markets are used to just park money.
there is great deal of growth still left in many of the BRIC countries, a lot of the things we take granted for in the developed world, the developing countries are just implementing now. In terms of infrastructure, communications, energy extraction, consumer service industry.
so I wouldn't call this a top. As a investor/trader the things we have to worry about is:
1) account size
2) leverage
3) daily dollar fluctuation of account
4) noncorrelated asset classes(diversification)
5) long term /weekly trend
if you find that your losing sleep at night, then your leverage is too high for you account size. I think back to the periods of late 80's and 90's and the fear and greed short term movements in the markets to give me a reference point where we are in the markets.
so we have two timing events coming up within 2weeks, FOMC and the week after that nonfarm payrolls. Just when everyone is getting ready to throw in the towel on the bond market. The BLS will come up with a string of weak numbers. Fridays consumer confidence was weak. And it will be the spring board to new highs on SP500, when the bond market fails to make further losses.
So the large money pools if they are short, they need to remove the risk from these two timing points. Since a discount below the previous high on the SP500 will become a long term price point. Once price slips above that point and the longer it stays above it, it fuels further gains and price moves away. So your short positions will have a hard time materializing profits. And thats where the risk lies. Plus the list of events and conditions posted above, provide similar favorable historical environment.
chris
I was thinking about how the long term buy and holders protect their gains accrued over the years.
as account equity increases year over year, the percent leveraged would be fixed. So as the asset class escalates in price more contracts are added to keep the percent leveraged fixed so the equity curve doesnt plateau out.
1% loss on spooz is 15 points, the recent loss from highs was more then 40 points or around 3%. Week to week oscillation waves have been around 1.5% or around 20-25 points.
So greater then average oscillation triggers intermediate term players to hit the sell button. And thats what some of the large institutions trigger, the stops of the intermediate term players to fill their positions or induce a profitable situation in their prepositioned options.
The evidence of it, is the ramp up post decline, when the institutions ramp up prices extremely fast to make the intermediate term players pay a premium to get back on board. The intermediate term players are forced back into the market as the spooz tests its highs. Friday was evidence of it. Another group of intermediate term players wait for those stops runs by the institutions, and wait for price to gap down and as soon as it stalls, they jump in, and as price tests the cyclical highs they dump out and wait for the next decline.
The technology consumption by developing world will eventually push Nasdaq back to its highs.
So how can we tell whether a decline is just a decline or a turn in the trend. The most important thing to watch is price itself. The other aspect is to watch other markets whether a correlation break occurs. Mainly the bond market. The bond market will spend time consolidating its losses here, and the stock market will do the same, but the main difference is the equity market will consolidate near its highs.
as account equity increases year over year, the percent leveraged would be fixed. So as the asset class escalates in price more contracts are added to keep the percent leveraged fixed so the equity curve doesnt plateau out.
1% loss on spooz is 15 points, the recent loss from highs was more then 40 points or around 3%. Week to week oscillation waves have been around 1.5% or around 20-25 points.
So greater then average oscillation triggers intermediate term players to hit the sell button. And thats what some of the large institutions trigger, the stops of the intermediate term players to fill their positions or induce a profitable situation in their prepositioned options.
The evidence of it, is the ramp up post decline, when the institutions ramp up prices extremely fast to make the intermediate term players pay a premium to get back on board. The intermediate term players are forced back into the market as the spooz tests its highs. Friday was evidence of it. Another group of intermediate term players wait for those stops runs by the institutions, and wait for price to gap down and as soon as it stalls, they jump in, and as price tests the cyclical highs they dump out and wait for the next decline.
The technology consumption by developing world will eventually push Nasdaq back to its highs.
So how can we tell whether a decline is just a decline or a turn in the trend. The most important thing to watch is price itself. The other aspect is to watch other markets whether a correlation break occurs. Mainly the bond market. The bond market will spend time consolidating its losses here, and the stock market will do the same, but the main difference is the equity market will consolidate near its highs.
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