How are you positioning for the eventual Market top?
- Thread starter Sean McLaughlin
- Start date
Sean,
I am with Ivanovich in that you canât prudently position for a top at this point. I completely agree this is unsustainable and that reality always comes back into a market eventually. Having said that, we are traders and we are not paid to make predictions, we are paid to trade the movement. And for the time being, the movement has an upward bias to me. As much as I may disagree on a gut level (and common sense), I can separate my personal feelings and trade just what the action tells me is happening. As history has amply demonstrated, markets can go a long way in spite of what the data or reality indicates to the contrary. I say, take the money and be ready for the reversal, whenever it comes. No reason to skip current potential profits based solely on your principles. Listen to the market and follow her lead.
Good trading all
BM
I am with Ivanovich in that you canât prudently position for a top at this point. I completely agree this is unsustainable and that reality always comes back into a market eventually. Having said that, we are traders and we are not paid to make predictions, we are paid to trade the movement. And for the time being, the movement has an upward bias to me. As much as I may disagree on a gut level (and common sense), I can separate my personal feelings and trade just what the action tells me is happening. As history has amply demonstrated, markets can go a long way in spite of what the data or reality indicates to the contrary. I say, take the money and be ready for the reversal, whenever it comes. No reason to skip current potential profits based solely on your principles. Listen to the market and follow her lead.
Good trading all
BM
I like this idea. As a new trader I am very confused. Therefore, instead of blow my account right away, I am slowly, cautiously following the market up. However, I, like many here, anticipate a pullback that will give merit to more buying. Time will tell...
Big Mo,
I'm not really attempting to make a prediction or trade on my principles. I am objectively looking at the rally since its March 2009 start and simply stating that STATISTICALLY chances are higher (than average) of a significant market pullback.
I'm just looking at the probabilities.
I completely agree with you, however, in that all momentum signs point to further highs from here. And further up moves can cause a monster capitulation rally from the last remaining shorts out there.
My thesis is that I will in NO WAY pick the top, but with volatility making new lows seemingly everyday, one could start to wade in very gingerly and cheaply with some put buying to prepare for the eventual turnaround and tandem volatility rise.
One could commit 5% or less of his account to purchasing ATM puts 2 or more months out, and roll them up if/when the market keeps rallying.
If and when the market makes its turn, you can add to your position by buying ATM puts at each strike on the way down (or rolling your open positions as necessary).
There are a million ways to skin a cat. This one at least offers some defined risk, and can be done relatively cheaply until we've finally caught the move.
My two cents.
Anybody else have any good ideas?
I'm not really attempting to make a prediction or trade on my principles. I am objectively looking at the rally since its March 2009 start and simply stating that STATISTICALLY chances are higher (than average) of a significant market pullback.
I'm just looking at the probabilities.
I completely agree with you, however, in that all momentum signs point to further highs from here. And further up moves can cause a monster capitulation rally from the last remaining shorts out there.
My thesis is that I will in NO WAY pick the top, but with volatility making new lows seemingly everyday, one could start to wade in very gingerly and cheaply with some put buying to prepare for the eventual turnaround and tandem volatility rise.
One could commit 5% or less of his account to purchasing ATM puts 2 or more months out, and roll them up if/when the market keeps rallying.
If and when the market makes its turn, you can add to your position by buying ATM puts at each strike on the way down (or rolling your open positions as necessary).
There are a million ways to skin a cat. This one at least offers some defined risk, and can be done relatively cheaply until we've finally caught the move.
My two cents.
Anybody else have any good ideas?
To pull the definition of what is happening google "climax run" in WJO'N's HTMMTS.
To get the "when" down, use the Rally Attempt Analysis from the same book.
For example in the '87 crash and its recovery the RAA played out four times going into the crash (1OCT, I think) It also signalled the beginning of the recovery on 03NOV.
This time out, things are different in their level of severity. The first ending of the Bull retrace was on 01SEP09. As usual there are several endings as thing go long. he final ending is going to be more or less global and it will be easy to track as it reverberates around the world from East to West.
the non stationarity of the trading window varies according to the fractal, with the slower fractal peeling off first. What is very noticable is that all fractals have nearly the same right side of the window.
In global terms, we are already in the window on the slowest trackable fractals. The WJO'N stuff applies to a daily chart and the first ending (the first opening of the window) occurred on a monthly chart in an observable manner.(01SEP10).
As you see some people are sniffing what is going on intuitively. Some people have opned on the question of "when" in terms of their consciousness. for most people what happens in markets is a surprise no matter what it is. Getting past that mental level is important.
If you look at a thread on women you see Nitro teaching his daughter the basis of using induction. All the above that I stated is based on deduction, an alternative to the surprise and black swan oriented world of induction.
RAA as you see, uses the market variables and the null hypothesis. It is kind of difficult to address good questions when an audience is primarily inductive in its thought process.
Roughly speaking, the contemporary problem solving, all based on induction, is a time bomb.
We are all in a global climax run and as it happens, people get to notice it more and more on faster and faster fractals.
What happens after the climax run plats out is a series of protective measures being invoked. these measures begin with individual traders going flat and then IB's will step in and elinate the IB risk engenders by their clients. At some point, markets will become more than one sided as the "cascading" (look this up) continues.
In '87 I traded the max POA accounts under NFA 206; I took all accounts to cash as did the IB for their boutique based invitation only accounts. The owner of the IB was a protogege of WJO'N, one of 22 persons. We retruned to the market 1 day ahead of the IBD announcement that the recovery was beginning.
Nodoji is making it clear as to how to trade with a eutral bias as the windowsopen on st and faster fractals. When the one sidedness of the market is exceeded. there will be a period when markets do not open. during that period order will be resetablished. This brings up the question of capital in accounts. Capital in accounts will be affected and out of the control, temporaily of the account holder.
During this period some changes in the monetary systems of the nations will be dealt with. Everyone wil be humping to get things rolling again.
Following 911 after GWB put down the reader in the kindergarten class, he recommended that everyone go out and "shop". Since reagan the US has been the greatest debtor nation and now we are running multiple wars.
The post point 3 period, will get to the FTT but it must be understood that after point 3 there will be VE's accelerated RTL's and successive new FTT's going short.
A person has to shift from induction to deduction to get a handle on critical thinking. That is not going to happen as everyone "knows" by induction. Too bad.
A lot of people got pretty far away from the basics in life of late. Growing up in the last Depression wasn't nice. Ending this Depression by starting a war isn't going to be too practical.
My kids had to can 300 quarts a year until they went to college. We always had 5 pigs five hives, 12 sheep, 12 ducks and 12 laying hens. We burned four to seven cords a year. Fortunately the desert is a litle more productive and you can grow cole crops year round.
So most traders will leave the market leave their accounts and do a workaround in their post trading careers.
The hierarchy is money, poer and infcation. Money is at the bottom. I'm too old to keep up medical malpractise insurance, but I do get along in terms of taking care of people.
This could work as long as time decay doesn't eat you in the event the market keeps grinding higher or ranging without a significant pullback. I mean it's not pulled back to the 20-bar moving average, which is very common in a trend, in 22 trading days, so already a predictable historic pattern has been violated.
The market is trying to test Thursday's high which sold off hard, leaving a potential reversal bar on the daily. I suggest waiting for a failure to break that high, or a failure to break today's high, either of which would leave a lower high, and give you safer timing on your entry.
how do you know this isn't another scenarios like the dotcom, its been 10 years already, maybe time for another.
look at how irresponsible the government is. if they're rigging the market (like they rig everthing else), you'd be stupid to fight it.
look at how irresponsible the government is. if they're rigging the market (like they rig everthing else), you'd be stupid to fight it.
Sean,
You saidâ My thesis is that I will in NO WAY pick the top, but with volatility making new lows seemingly everyday, one could start to wade in very gingerly and cheaply with some put buying to prepare for the eventual turnaround and tandem volatility rise.â
You are right, there are a million ways to skin a cat. A thrust is coming when the volatility picks up again. But it could be up again with more exuberance entering the market (maybe a dead cat top if you will). Trouble is you canât have it both ways IMHO. You are picking a top by trying to wade in now and position short. Now if you can see the future, by all means position accordingly. But I canât and positioning now for a short (we all agree is coming) is picking a top. Until the market tells us to get short, I wonât be doing so.
Of course I donât have all the answers so do what your trading plan tells you to do. But picking tops and bottoms is something I wonât be trying to do now or ever. Of course the big money is made by taking your shot but I want it to be on something with better odds than a coin flip as far as I am concerned (my opinion only). Again, things can get much worse (much higher from my view point) before reality sets in. So if that happens I will ride the train until definitively told otherwise by the derailment or exogenous event. Then hammer it all the way down.
Best of luck though. It will be interesting no matter what happens.
BM
You saidâ My thesis is that I will in NO WAY pick the top, but with volatility making new lows seemingly everyday, one could start to wade in very gingerly and cheaply with some put buying to prepare for the eventual turnaround and tandem volatility rise.â
You are right, there are a million ways to skin a cat. A thrust is coming when the volatility picks up again. But it could be up again with more exuberance entering the market (maybe a dead cat top if you will). Trouble is you canât have it both ways IMHO. You are picking a top by trying to wade in now and position short. Now if you can see the future, by all means position accordingly. But I canât and positioning now for a short (we all agree is coming) is picking a top. Until the market tells us to get short, I wonât be doing so.
Of course I donât have all the answers so do what your trading plan tells you to do. But picking tops and bottoms is something I wonât be trying to do now or ever. Of course the big money is made by taking your shot but I want it to be on something with better odds than a coin flip as far as I am concerned (my opinion only). Again, things can get much worse (much higher from my view point) before reality sets in. So if that happens I will ride the train until definitively told otherwise by the derailment or exogenous event. Then hammer it all the way down.
Best of luck though. It will be interesting no matter what happens.
BM
Yes, I was short going into March 2009. My log shows on Feb 27 I entered 3 swing trades short and these were all full size positions. I covered 2 trades on March 4 and the last on March 9. I didnât get long until early April.
The answer to your other question is also yes. I have been taking smaller positions since early March. Parabolic indexes like this are no fun to swing trade.
The answer to your other question is also yes. I have been taking smaller positions since early March. Parabolic indexes like this are no fun to swing trade.