Ftse Down

[JustYield]

Thanks for posting JY. Excellent post.

I am interested in your view on how high frequency trading may be impacting or used to impact price/volume. Given the reports, which appear credible, of the majority of trades being of this nature. Part of me says, ok, they're market participants so volume is volume, but part of me thinks it means volume can also be painted at little cost (or even profit) purely to misdirect or 'entice' as you describe it.

Volume can never be entirely hidden and provided the market is liquid, it is the relative volume (and associated affect on price) which matters.

What I am describing is an "under the radar" parasitic trend anticipation approach, I've no idea how the bigs make their plays. It seems fleecing the public for fees and commissions is their MO.

[R K]

Volume can never be entirely hidden and provided the market is liquid, it is the relative volume (and associated affect on price) which matters.

What I am describing is an "under the radar" parasitic trend anticipation approach, I've no idea how the bigs make their plays. It seems fleecing the public for fees and commissions is their MO.

Ok, thanks. So, I'm looking at your earlier chart of BDEV from the other thread

http://www.housepricecrash.co.uk/forum/ind...st&id=15923

Can you clarify why you're saying you're looking for a volume of 5-10M to end the move? Because it is of a similar order to that which started it? or for some other reason?

[JustYield]

Thanks - how did you first find out about markets and fractals - via Mandelbrot book or some other source?

Ironically Mandelbrot appears to have missed what is under his nose (unless he is keeping it back). He knows and demonstrates that price moves exhibit fractal behaviour, but he could see no way to profit from this insight. He seems to have gone down the magnitude route (variance) rather than the vector route. And he completely ignored volume, as I recall.

There's now loads about this on the web springing up: search on price volume relationship. Fortunately most people will never get it and of those who do very few will get round to engaging with the market with any conviction.

Ok, thanks. So, I'm looking at your earlier chart of BDEV from the other thread

http://www.housepricecrash.co.uk/forum/ind...st&id=15923

Can you clarify why you're saying you're looking for a volume of 5-10M to end the move? Because it is of a similar order to that which started it? or for some other reason?

Yes, essentially. The order of magnitude concept is exactly right. It's broad brush for a forum, the actual end will be crystal clear when it arrives, and the following day or two will confirm the top.

BTW, I don't follow BDEV or any LSE stocks, it was just an illustration when I saw Bubb's use of the builders as a leading indicator for house prices, which I think is a valid approach.

[R K]

Ironically Mandelbrot appears to have missed what is under his nose (unless he is keeping it back). He knows and demonstrates that price moves exhibit fractal behaviour, but he could see no way to profit from this insight. He seems to have gone down the magnitude route (variance) rather than the vector route. And he completely ignored volume, as I recall.

There's now loads about this on the web springing up: search on price volume relationship. Fortunately most people will never get it and of those who do very few will get round to engaging with the market with any conviction.

Yes, essentially. The order of magnitude concept is exactly right. It's broad brush for a forum, the actual end will be crystal clear when it arrives, and the following day or two will confirm the top.

BTW, I don't follow BDEV or any LSE stocks, it was just an illustration when I saw Bubb's use of the builders as a leading indicator for house prices, which I think is a valid approach.

That's fine. I was just making sure I'd grasped your underlying point. If you get the chance to follow this up after the event it would be appreciated.

[Charterhouse]

Ironically Mandelbrot appears to have missed what is under his nose (unless he is keeping it back). He knows and demonstrates that price moves exhibit fractal behaviour, but he could see no way to profit from this insight. He seems to have gone down the magnitude route (variance) rather than the vector route. And he completely ignored volume, as I recall.

There's now loads about this on the web springing up: search on price volume relationship. Fortunately most people will never get it and of those who do very few will get round to engaging with the market with any conviction.

So would you broadly agree that the current equity market rally could be vulnerable, built as it has been on low volumes - if you look at the move over the last year the moves down have occurred on high volumes while up moves (bull traps?) have occurred on lower volumes.

[MOP]

So would you broadly agree that the current equity market rally could be vulnerable, built as it has been on low volumes - if you look at the move over the last year the moves down have occurred on high volumes while up moves (bull traps?) have occurred on lower volumes.

That's the way I understand it. Probably why so many people are expecting a fall in the fall.

[JustYield]

So would you broadly agree that the current equity market rally could be vulnerable, built as it has been on low volumes - if you look at the move over the last year the moves down have occurred on high volumes while up moves (bull traps?) have occurred on lower volumes.

Indeed. My thesis is that this is the first retracement of a long term Bear market, which began in 2007. However, this retracement will go further than most expect, until they capitulate and everyone agrees the Bull is back (volume will even appear to confirm this - don't be fooled, there will be big selling in there). There are technical things the market has to accomplish before it can begin the next leg down. In any event, volume tells the story.

[The Masked Tulip]

Indeed. My thesis is that this is the first retracement of a long term Bear market, which began in 2007. However, this retracement will go further than most expect, until they capitulate and everyone agrees the Bull is back (volume will even appear to confirm this - don't be fooled, there will be big selling in there). There are technical things the market has to accomplish before it can begin the next leg down. In any event, volume tells the story.

I think the conjunction between Saturn and Jupiter later this month will be significant

[Wait & See]

Indeed. My thesis is that this is the first retracement of a long term Bear market, which began in 2007. However, this retracement will go further than most expect, until they capitulate and everyone agrees the Bull is back (volume will even appear to confirm this - don't be fooled, there will be big selling in there). There are technical things the market has to accomplish before it can begin the next leg down. In any event, volume tells the story.

Agree.

Now all in cash, after seeing RBS sink down the pan this morning. This market's not the place to be for investors.

[grumpy-old-man-returns]

Indeed. My thesis is that this is the first retracement of a long term Bear market, which began in 2007. However, this retracement will go further than most expect, until they capitulate and everyone agrees the Bull is back (volume will even appear to confirm this - don't be fooled, there will be big selling in there). There are technical things the market has to accomplish before it can begin the next leg down. In any event, volume tells the story.

you got any physical pm's JY ?

[profitofdoom]

Fractals in the trading sense are building blocks of price-volume sequences. Price moves in channels and the beginning, continuation and end of a channel is marked by price-volume behaviour. Channels of opposite sign overlap at one price point. As one channel ends a new one begins. Price is always bound by a channel, but more usefully it is always bounded by nested channels, the accurate description of which gets skilled practitioners to certainty about what comes next in the sequence. You need three fractals or channel levels to give certainty. You don't ever know exactly how big the next move will be but you do know when it has started and you will know when it is ending, price volume behaviour tells you, and you take the ride doing what the market tells you to do. The difficulty is in discerning the different levels of these nested fractals and avoiding taking signals from fractals other than your chosen trading fractal.

It's pretty mad frankly.

Fascinating,can you recommend a book to explain it all in depth?

[Confounded]

http://www.zerohedge.com/article/las-weeks...sells-1-billion

Last Week's Insiders Transactions: 5 Buys For $13.4 Million, 145 Sells For Over $1 Billion

Submitted by Tyler Durden on 08/07/2009 10:35 -0500

Courtesy of Finviz, the ratio of insider buying to selling transactions is 5 to 145. Total transaction value: Buys: $13.4 million; Sells: $1,042 million. At least insiders are feeling (or its dyslexic equivalent, fleeing) the new bull market.

[markyh]

Agree.

Now all in cash, after seeing RBS sink down the pan this morning. This market's not the place to be for investors.

Really? Today dropped a bit and my RBS holdings sold on a 10% drop linked to a profit tracker set up 3 weeks ago, but then it has risen at least 25% in that time.

But despite this sell off at close today I was 5% up on the week on my total holdings, and am still at least 30% up in the last 3 weeks, but then my major holdings are with RBS, Lloyds, Barclays and HSBC plus a few other cyclicals, only have about 15% defensives.

M

[whyohwhy]

I reckon that they are wrong :: See: Manic Swings

And soon they will be confronted again with reality.

Let the bulls have their day, but dont forget to Sell (whatever you need to) in windows like this.

My current guess is a swing back will start this week, maybe in the next 24 hours,

but it may not. I'm not at all sure what the news trigger will be, if one is needed.

The point is, that "stretched" markets like this one, are vulnerable to all sort of news.

Almost any pin can burst the hope-bubble.

"Current guess" hits the nail on the head.

Your previous post about trading was spot on - successful traders make money in both bear and bull markets because they don't have an over-riding bias/opinion one way or the other.

Put your stop losses in and seek that alpha of which there is so much thanks to the doom merchants of Q4/Q1 (although I'll happily take beta at the moment, thank you, especially in financials)

[ParticleMan]

In doing so I saw how price moves to entice you to make mistakes.

A good series of posts but I'll pick you up on this - I assume you're talking about "investors" and other such animals wading into their own private tar-pits.

From my vantage (no, you don't get to know specifically what this is although some may have guessed by now) I now see more activity (ie swap volume) on-market who's intent appears to hold more in connection with your goal (of reliably estimating pricing error within tight risk limits).

As I quipped some time ago - "machines have no feelings".

I wouldn't get too addicted to the kool-aid in other words.

There's plenty of other approaches in this field, and there's plenty of other people making them. What makes this profitable is the source (and size) of the error, not necessarily the best-fittedness of the approach.

Practice your science with caution - don't assume that your winnings are due to skill.

As I said on another thread, the amount of quantitavely eased cash that's been pushed down the neck of the fois gras goose that is today's market is awesome. And resultingly, anywhere you care look - prices are just plain wrong.

(when bolt and flash get switched off - they'll get wronger for a while, too)

Edited August 8, 2009 by ParticleMan

[JustYield]

A good series of posts but I'll pick you up on this - I assume you're talking about "investors" and other such animals wading into their own private tar-pits.

No, I'm talking about traders. Most lose.

From my vantage (no, you don't get to know specifically what this is although some may have guessed by now) I now see more activity (ie swap volume) on-market who's intent appears to hold more in connection with your goal (of reliably estimating pricing error within tight risk limits).

Yes some trades are very "crowded". Why don't you tell us more about what you do? No one reads these threads.

As I quipped some time ago - "machines have no feelings".

It doesn't matter where the volume is originating, the price-volume sequences do not change.

I wouldn't get too addicted to the kool-aid in other words.

LOL! Not the first time I've heard that...

There's plenty of other approaches in this field, and there's plenty of other people making them. What makes this profitable is the source (and size) of the error, not necessarily the best-fittedness of the approach.

Practice your science with caution - don't assume that your winnings are due to skill.

Now it's my turn to pick up - it is entirely due to skill - the correct and timely application of principles that all markets follow. Certainty, as sure as the sun will rise tomorrow, can be achieved. Of course this goes against all conventional wisdom. I don't wish to over-egg where I currently sit in the continuum of traders - but it's looking very promising so far. As you know, I'm not one to exaggerate or make claims. This stuff raises hackles and people talk of Kool-aid etc.

As I said on another thread, the amount of quantitavely eased cash that's been pushed down the neck of the fois gras goose that is today's market is awesome. And resultingly, anywhere you care look - prices are just plain wrong.

(when bolt and flash get switched off - they'll get wronger for a while, too)

I take your general point, knowing what I know is one thing, reliably extracting from the market is another: that is the engagement and conviction question all traders face. However, what I have learnt is not due to current market conditions. It applies in all markets, on all time frames (provided sufficient liquidity exists).

[ParticleMan]

No, I'm talking about traders. Most lose.

Most participants by number, yes. But not when ranked by volume.

In other words - my take is that there's presently a reasonable number of entities in the market each trading large volumes without "losing" (in terms of where the book sits post- vs pre-session) - the strategies vary (risk management apears fairly uniform), the outcomes do not.

All of these strategies will, I think, be obsoleted roughly as soon as Reserves stop handing cash to the walking wounded (and let them die); because all of these strategies essentially serve to compress error in pricing (by pocketing the NPV of the difference). If the error (in the form of bidding strength being deliberately misdirected for political ends) is removed, so too is the profit center.

And then the whole sorry game will start over.

[Joey Buttafueco Jr]

Ironically Mandelbrot appears to have missed what is under his nose (unless he is keeping it back). He knows and demonstrates that price moves exhibit fractal behaviour, but he could see no way to profit from this insight. He seems to have gone down the magnitude route (variance) rather than the vector route. And he completely ignored volume, as I recall.

There's now loads about this on the web springing up: search on price volume relationship. Fortunately most people will never get it and of those who do very few will get round to engaging with the market with any conviction.

A couple of questions (this is turning into an interesting thread)

1. Why don't you scale up your operations? I recall you mentioned scalping -is there a limit to how much you can trade before your advantage is sliminated

2. Have you written software to do the fractal analysis?

[MOP]

A couple of questions (this is turning into an interesting thread)

1. Why don't you scale up your operations? I recall you mentioned scalping -is there a limit to how much you can trade before your advantage is sliminated

2. Have you written software to do the fractal analysis?

Bump

[bill still]

It seems like the natural attempts for those who are still tied into the notion that national economies depend on consumer spending. They'll do anything to convince us to empty our wallets of every last cent.

I'm becoming more baffled by the markets with each passing day now. Most of the "better than expected" results have been based on job cuts etc so I don't understand the euphoric reaction. The "improved" GDP figures are largely based on government spending while consumer spending continues to contract. We still face the commercial real estate implosion, Alt-As, Option ARM etc I could maybe understand people piling in when the media was ramping the green shoots, but they have now faded to a large extent. I reckon the market could look down and have a Wile E Coyote moment imminently.

What is this rally really based on? I don't get it.

[MOP]

It seems like the natural attempts for those who are still tied into the notion that national economies depend on consumer spending. They'll do anything to convince us to empty our wallets of every last cent.

Yep. Won't be long now before the wallets are empty.

Any news from the Fed meeting yet?

[getdoon_weebobby]

or am i clutching at straws?

[Charterhouse]

Hope you aren't but really not expecting any sort of collapse til some volume returns to the market.

[adamLancs]

No, you're right, I saw it myself. I think they turned down a bit then turned up a bit, before turning down a bit again. Something is going on...

[MOP]

DOW 9246.21 -91.74 -0.98%

NASDAQ 1966.85 -25.39 -1.27%

S&P 500 996.03 -11.07 -1.1%

Did the Fed say something the DOW doesn't like today?

Edited August 11, 2009 by MOP