The ACD Method
- Thread starter sbrowne126
- Start date
Not small does not equate with major. Let's keep things in perspective. A lot of the big players in South East Asian markets punt the HS as well, and it is often a leading indicator for the daily performance of the smaller regional markets, in the same way the States leads global markets.
The S&P 500 is as it states, an index of 500 stocks.
My very first study of the Thai market revealed 495 actively traded stocks in total. Post Lehman, a blue chip SET50 stock would set you back all of $1 a share. You could buy DELTA for about 9 baht, then less than 30 cents, below book value, and they never paid less than 5% dividend a year. I laugh when I see a good dividend stock paying 3%, hell I get close to that on a fixed deposit with a government guarantee.
So, in comparison to this, Hang Seng and Nikkei are not small.
Perhaps you would prefer tiny and small as appropriate expressions, but then I struggle with why funds have been investing cheap QE dollars meant to stimulate the American economy in a tiny market like Thailand. Or Indonesia, or the Philippines.
That's a very good question. I actually pulled up my data from 2011 to take a look. That was the last year we really had any kind of meaningful downside volatility. The answer is, we got number line confirmations to the UPSIDE right before major corrections.
Now why and how this happen? Well, the corrections we got in April and July of that year both came right off swing highs. So the market was acting well going into the highs. My theory to this is that sharp corrections are outliers. ACD is not effective in predicting outliers because by definition, outliers fall outside your data set. ACD does a good job modeling "normal" markets. It takes the patterns in volatility, the centering of important time zones and together with observed price action behavior, spits out very predictable results.
Market crashes or corrections happen when something breaks or snaps. It's very hard to time those events. The goal is simply to have a risk management protocol in place in order to deal with them rather then try to predict them. Now, if you looked under the hood at other things going on in the market, perhaps there would have been some clues. I've said before many times that often the best tells are in the currencies. When you see money sharply moving out of risk countries and into safe havens, something is up. If there is a tell out there when a crash or sharp correction is coming, you are much better off looking at the currency charts then the SP 500.
I've got a pretty good eye so I tend to notice very subtle things going on. I'm sure you will notice some action in a particular stock or sector that seems off or out of character that will clue you in to something happening. But it's highly unlikely that the number lines will be the tell.
For example in 2007, credit spreads were blowing out while the spoos were making new highs. And by credit spreads I mean things like the TED spread and the OIS. Watch these like a hawk. When they start to blow out, you'll be amazed how few people even notice. Both these spreads telegraphed the 2007 top and the sharp 2011 correction we had after the debt downgrade.
Now the TED spread IS something you can trade!
Mav,
what are your thoughts on GBPUSD at these levels...I have a 30 NL that had confirmed down for a while. Although, I still remember your points from earlier in the thread.
1. It seems you don't like to enter new trades towards the end of the month?
I want to short here so bad but my reluctance is that GBP is seemly so resilient across all pairs even though the NL says otherwise
what are your thoughts on GBPUSD at these levels...I have a 30 NL that had confirmed down for a while. Although, I still remember your points from earlier in the thread.
1. It seems you don't like to enter new trades towards the end of the month?
I want to short here so bad but my reluctance is that GBP is seemly so resilient across all pairs even though the NL says otherwise
Still in a confirmed neg number line. There are MUCH easier pairs to be in right now rather then trading the chop of cable. Remember, trading is hard enough as it is, don't challenge yourself! LOL. Even the easy trades will be hard so give yourself a break.
The TED is very actively traded. It's treasuries over eurodollars. It's the spread between the less risky treasury rate with the riskier libor rate. The spread will widen when credit tightens, that's when you want to be careful. There are many variations of the spread. In other words it does not have to be US 10 year notes over 10 year Euro Dollars. Could be 5 year notes over 5 year EuroDollars or 2 year Notes over 2 year Euro Dollars, etc. It's very heavily traded in all durations.