My Chick Goslin "Intelligent Futures Trading" Journal

Ok Ashan, two tips for you. Then I will go back to being silent.

The first one me and Chick talked about today.

ML Velocity-- you may be at a disadvantage by the way your charting the ML. By not looking at the ML in dots/squares or some kind of format that allows you to see how far the ML has moved from the day before. This is invaluable. When the ML is moving in Gaps it represents a lot more velocity and the odds of a continuation are considerably higher than if it is just creeping along. You use a line to represent the ML. Which is fine, I have done it in the past. But I found using it like SMR helps in this regard.

Second tip is in regard to %'s of margin. Different market segments offer different margin characteristics. So when figuring 50% and 100% of margin for profit you may be better off taking this into consideration. I only have two clear examples.

In regards to true commodities like Corn. It is not uncommon to see it under-margined and have a move go for 250% of margin in a good trend. On the hand, in regards to the S&P 500 if I am ever up 50% of margin. I am looking to lock some profits down immediately. There was a time when I would be up 1k in an ES trade and had to run to the door with it or it would be gone.

These two segments grains and stock indexes represent this tendency in regards to margins. And ask Chick about this as well.

We do this subconsciously and you would to with experience. I am just trying to give you a heads up right now. By learning how to adjust % of margins according to the 'nature' of different segments can help you right now.

that's all and I enjoy reading your journal
 
Quote from TGM:

For instance, if you look at the attached chart. The anti really worked when the market first went concurrent to the upside. The first cross worked when the market was still concurrent to the upside. When in a crosscurrent mode.......the pullbacks fall off. When the market is not concurrent ---you are rolling dice by not understanding the ML cycle.
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I messed up one thing in the above statement. In regards to the first cross on that last big rally, the market was crosscurrent NOT concurrent.

The anti worked brilliantly because the ML was ramping up. The first cross happened from a crosscurrent mode. The market then went concurrent and took out the previous high.

The point I would make is that IF the market is crosscurrent and there has been a good trend (subjective) these tend to test the highs taking the market back concurrent. BUT these more often mark the end of the trend for a while. The ML does not have near the velocity of a 'freshly' concurrent ML.

On the other hand, if you go back and look at all the very successful antis and smaller pullbacks you will notice a positive building ML (the more velocity the better). These tend to outperform the others by multiples. And you take no heat on them. They just explode for 50-100% of margin.
 
Ashan and TGM,
Great stuff,
TGM, I am not totally sure what Anti and Antis are.
Is there any way you can put a number or an X on the
areas on the chart you are referring to? I understand
concurrent and crosscurrent mode.
Thanks, just trying to be a better trader. Love Chick's book.
Jack
 
Quote from bradcox3:

Ashan and TGM,
Great stuff,
TGM, I am not totally sure what Anti and Antis are.
Is there any way you can put a number or an X on the
areas on the chart you are referring to? I understand
concurrent and crosscurrent mode.
Thanks, just trying to be a better trader. Love Chick's book.
Jack
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Jack,

I am not going to put up any more charts on Ashan's thread discussing other methods or LBR's tricks. The anti pattern has been around a long time in one way shape manner or form. You can google 'LBR Anti'. Or you can buy the book that made it famous to the traders --Street Smarts.

I understand you are just curious and trying to be a better trader. But I have already said enough on this thread regarding other methods/tricks.

Lets let Ashan get stuff back on track.
 
Just to set the record straight (maybe for the first time!), the real originator of the 'Anti' (although it was not called that) is Security Market Research (SMR) and the genesis of the concept was contained in their original trading manual published circa 1975. SMR was also the originator of the 3/10/16 dubbed as the "SMR Timing Indices" clear back in 1969 or so....and they still provide a chart service with their own proprietary buy/sell signals. They are at www.smr.com


Oh and thanks to you Ashan for being so kind as to allow us to digress off topic of your trading approach to discuss these concepts.
 
Couple letters put out by Chick yesterday:

Friday early morning (1:00 am)

To review the VIX rule: Normal pattern is for VIX to move opposite price. Meaning Stocks up, VIX down. Stocks up big, VIX down big. And vice versa. Occasionally though get aberration in that both VIX and price move same direction or one closes around unchanged while other has good move. When this happens (aberrations) then VIX rule will produce a next day directional signal that is surprisingly reliable. The rule is when VIX and price diverge from normal pattern, believe the VIX. Of course this rule does not work all the time, nothing does, but usually even when the VIX rule does not work, it only fails slightly and often it immediately precedes big one day moves. We have had three VIX next day signals in past two weeks.

Week ago Tues Dow was down 100 (low close for move) , but VIX was essentially unchanged (when it "should" have been up decently). So since rule is believe the VIX, this was a clear next day up signal and believe Dow was up 350 next day. This past Monday stock market closed essentially unchanged, but VIX was down about .90 (when it should have been unchanged also). This was another clear next day up signal. I did not think that one would work since market was down so much in after market on the bad earnings news, yet next day market ended up over 100 points. And finally yesterday market was up moderately, but rather than be down like it "should" have been, the VIX was also up little. This was mild next day down signal and today Dow was down 284. So three VIX next day signals in two weeks and each worked for triple digit Dow moves.

Unfortunately this VIX next day signal does not work that well all the time, but it does work most of time. And since the reasons it works are natural and recurring, it should always work well. (Have gone into the "why" of this before so will pass on doing so now). This is only a one day rule. Today Dow down big but VIX up big as "should" have been, so no next day signal. This something worth keeping an eye on since rule quite reliable when get it.

Stocks: Obviously I was at least few hours early in going back long, and possibly way too early. Could be dead wrong but continue to see overall picture in stocks as quite positive, despite the down trend, and today's big down. However, anytime short term momentum turns down (as now has in stock indexes) and markets still in a down trends, will have at least some short term vulnerability, and possibly a lot. So risk high here being/going long stock indexes, also are going against lines, which don't like to do for more than day or two, if that. However, still see big upside potential and so will take some risk on longs here.
What don't want to see next day or two is much acceleration of current down moves in SL's. To avoid this will need to be at least unchanged tomorrow, and preferably up. So if down much tomorrow will have to make adjustments (at least lighten up and possibly/probably out).

Almost all markets are now in strong crosscurrent modes. The normal rule for this mode is to expect more choppy, sideways type markets. However, this is not the case when are at a time of general trend changes. At those times it's usually best to go with the solid ML cycles and override the existing, old trend.

Trend change and potential trend change times are very difficult times to trade, but since moves tend to be very big and fast, these times also have unusually high potential. So see current market environment as one of higher risk with lower probabilities, but also unusually big potential.

Bottom line: Personally prefer to continue to go with the trend change scenario and hope will react/adjust quick enough if this view proves wrong. In other words continue to look to buy stock indexes & dollar on one/two day dips, and continue to look to sell commodities, currencies and bonds on one/two day rallies, with exception of cotton where still see longs as justified and wheat where prefer sidelines. But if action goes other way Friday will have to adjust, at least for weekend.

Chick Goslin
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Friday midday (11:00am)

About 1:30 PM Eastern time, Fri, 7/25

As of this moment stocks (as measured by Dow and S & P, which is what use when looking at next day VIX signal) are around unchanged, but VIX is down 1.02 ("should be unchanged also). So if both were to close at these levels would give a clear next day up signal. I go by close, but this is an intra-day positive sign for stocks.

At same time NDX up about 20.00 and Russell 2000 up 6.00 while Dow down a little and S & P unchanged. This positive relative strength.

Future always unknown, especially intraday, but both these good upside positive warning signs. Safer/smarter to wait for after weekend if want to buy, but still like long side of stocks.

Don't see anything in other markets to change last night's view. Bond shorts doing well but this can change in hurry. See pattern in Dollar Index as potentially very positive, and conversely see virtually all foreign currencies as potentially very negative. Have some short term vulnerability in opposite directions for next couple days or so due to SL's being at recent extremes, but ML cycles solid and when this case extreme SL's don't produce much counter moves.

Always risky to be in over weekends and more so with current uncertain financial situation, but if markets in general hold current levels (or better, i.e, higher stocks/dollar, lower others) into early Monday/Tuesday "should" see more up in stocks/dollar, down in everything else (except Cotton and Wheat which still see as positive).

Chick Goslin
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Chick went over the VIX with me before. He told me it was appropriate to call it a “fear index”. The VIX measures the premium that the options sellers charge on the options they sell. When the VIX rises the premium is higher, and vice versa. Since the options sellers tend to be large, sophisticated institutions, they’re the smart money crowd. So when the smart money isn’t too scared of the downside and the VIX doesn’t drop in proportion to what it “should” on a down day, there is a next day up signal.

I added another ER2 contract so I’ve hit the contract limit for that trade now. Trend is still mildly down but ML up cycle is very powerful to the upside. SL is also turning down from long term highs so there may be another down day or 2 but otherwise this looks like a good short term trade, or maybe a longer term one if the momentum looks good enough to override or change the trend.
 
I have always used the layout shown in my previous pictures to chart the markets, but TGM’s suggestion and pictures were enough for me to tweak the format and make some changes. It is now radically different from before.

1) The bars are spaced apart a little more than before making the daily activity much easier to read.

2) The momentum lines (ML and SL) are much easier to read because the window size was almost doubled. Combined with #1 and a dotted line in the ML, this makes reading the SL/ML cycles and emerging patterns so much easier. My old charts were far inferior for charting the momentum lines.

3) Increasing the momentum line window has shrunk the price window. So to correct this without distorting the price bars I had to manually set a range for the price window to graph. This centers the price flows o the window doesn’t look like an artificial barrier if price is close to the highs on the window, as well as scaling the size of each price movement correctly because there are no year old bar values that are forcing the whole price window to zoom out.

I like the changes quite a bit, reading my old charts was sometimes unpleasant because of the problems there were with scaling and a small window for the momentum lines. Now everything is large and easy to read and understand. I have a picture of Cotton below to show the difference as well as the reasons why cotton seems like a good long despite trend down, and ML down and just recently turning up (and why Chick liked the trade even when it was down)

I wish I had more time to post pictures for all the markets to show what I am seeing, but just no time right now. I may be able to tomorrow.


Copper is no longer appealing for a trade to me. The issue I mentioned earlier of the market getting ready to drop a large 2+ week dip in price is now starting to enter the 10 day “anticipation” zone. So it could be disregarded if we wanted to trust the current lines, but it is still a issue in the background. The other big problem is the ML getting ready to drop a large downcycle from the SL, this will start weakening the ML in 2-3 days unless SL continues lower from here right away. This could very well happen which would keep the picture very negative, but copper is not as appealing as it was last week.

Gold and silver are also dropping a “valley” in the SL soon so the ML will weakening somewhat, but SL in both is already at lower lows. It is also turning though. In Silver there is a lower high so this new lower low will start a small series to the downside. Trend has also flattened there. Problem for shorts is Friday had Platinum the strongest, with silver and gold about the same. This is just one day but slightly points to the upside. I would ideally like to see another 2 up days in gold/silver with platinum the weakest to make a good case for shorts.

All currencies are having the MLs dropping a 3 week old valley in the SLs. But like the metals the SLs are already lower than before and SLs are strongly down, so it may be worth it to go with them anyways on a good up day. The most desirable short for me is the Yen and the Swiss. The Swiss has a weaker up trend than the euro, it is actually flat here, and the swiss has 2 separate series of SL making lower lows and highs (broken by the 3rd cycle where the SL made higher highs) The major advantage of the Yen is that it tends to move opposite stocks. I know Chick has said the Swiss was better than the euro for longs in the past when stocks were weak, so this probably means the swiss is also better for shorts when stocks are strong. The pattern so far has certainly showed that.

Natural gas has had 9 consecutive down days. I caught most of the move with a pair of mini contracts and part of the move with a full size contract, so profits here have been exceptional. Bear markets move faster than bull markets so this is not unreasonable, but still unexpected because I figured there would be some upside relief but there literally was none. This market may be pushing it now. I mentioned earlier when it would become psychologically painful to hold onto a position when profits were so good, here is an example of that. I think I will exit my mini contracts on Sunday. Even if there is another down day I will just let it go and wait for a rally to come (if one ever does)

Grains are mixed with wheat actually looking a bit positive like Chick mentioned, and corn about ready to finish a very long down cycle in the ML (or maybe not if downside pressure continues) The best pattern looks to be soybeans. Its trend is flat and ML is on the strongest down cycle of all commodities (It looks like Natural gas when it was starting) Problem is that Soybeans was the strongest of the group for quite some time and the rule is we want to long the strongest and short the weakest in a group, soybeans was the strongest but now the lines are the best for shorts. I’m not sure if this means it’s planning to play catchup and plummet like corn/wheat, or if its downside move will be temporary and it will keep its gains better than the other 2 like I’d expect from the strongest commodity. I will probably short this one lightly due to poor group relative strength.

All softs continue to be very weak with sugar showing the best downside pattern. I have a total of 7 shorts there (not a big position since this is the smallest contract) Coffee is still very negative but price is at levels where there has been a year+ sideways range. So I may short one contract just to be with the lines and perhaps squeeze out a decent profit if coffee drops to the bottom of the range. It will be interesting to see if it will break through. Chick says not to give too much weight to these ranges but it can be tough psychologically.

The cocoa trade now looks like a clear downside candidate with my more readable charts and the commodity wide bear market. It has had a good up day so I will lightly short one contract here. If tomorrow holds even or gets some more up I’ll probably add a couple contracts.

Stocks have certainly been stronger on the upside than downside recently. This can sometimes be an intermediate term fluctuation (which is why we have a trend line to show overall direction) but with the VIX continuing to put out next day up signals, trends weakening, MLS pulling up hard after a prolonged period of downwards grinding from SLs making lower lows and highs, it finally looks like time for a turn up in price movement. Still have to be careful since trend is down and can not be anticipated up yet, but I am comfortable with my ER2 position. Of course I remember saying that with the NQ contracts too, then I exited on the lows. But that is the nature of this game and the reason why getting into marginal trades is risky. Lets hope this time is different (dangerous words I know)

 
Quote from AshanD:

.... Combined with #1 and a dotted line in the ML, this makes reading the SL/ML cycles and emerging patterns so much easier. ..[/IMG][/URL]
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That's not really a dotted line..that is a dashed line for the ML...I think TGM wanted specifically a dotted line exactly like the SMR Pro charts.

You can probably see the 'velocity' of the ML a little better with a dotted line as opposed to a dashed line.
 
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