Euro Fx, 5m chart, Today

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The 18.6 year cycle in the Dow Jones Index

I applied the famous coppock indicator for yearly chart instead of monthly chart. It gives outstanding results and put in evidence the long term 18.6 years cycle for stocks.

Here there are all the signals generated by the oscillator:

1. Short 175 - 1929
2. Cover and buy long at 125 - 1942
3. Cover and sell short at 966 - 1966
4. Cover and buy long at 1222 - 1983
5. Cover and sell short at 10095 - 2000
6. Still short - 2009

The coppock was originally intended for monthly trading, so using both monthly and yearly signals would have been generated much more profits.

Private Post for Hugo

USD/GBP Cme Future, 1d chart

A downward channel, today failed to go over the midpoint of the channel.

Still bearish

Sp500, 1h chart view

995?

Flat and easy

When the market is flat and oscillatory is easy to forecast it for quite some time, in this example we have daily chart of stm microelectronics listed at Milan stock exchange. With an average 13 bars cycle the auto regression algorytm that i use worked well. For one month it forecasted perfectly the behaviour of the stock, this is the best possible situation that can happen without a strong trend that hurts your forecast.

The forecast starts at the right of the vertical blue line, the arrows point the 13 days cycle. The envelope bands also worked great giving supportand resistance for each day.

Here another example with the future of USD/GBP (1h chart):

The importance of the stop loss

My attemp to follow the downtrend, unfortunately the market often bring surprises even to the most sophisticated forecast methods.

At 986.25 i stopped because i smell too much strong, it was right and once again i underline the importance of the stop loss.

E-Mini S&P500, 1h chart

Today i bought first at 1007.25 then at the lower band at 998.25 just 1 tick above today low.

I sold everything at the entry price of the first contract, 1007.25.

Non farm payrolls -247k

It is a decent data, and fell in my forecast range. I expect a positive trend for employment for the rest of the year.

Non farm payrolls forecast for tomorrow

I expect for tomorrow a non farm payrolls close to -300K, my range is from -230K to -370K. On the left a forecast for all 2009 starting from january, the worst month. By the end of the year, in the best scenario we could even see a positive non farm payrolls that could put an end in this big crisis.

Nasdaq Composite, yearly chart

Chart of Nasdaq Composite since its inception of 8 february 1971, with volumes.

1300 is a strong support that hardly will be broken this year, i remain bullish for 2009.

Bollinger Band and TILLSON’S T3 Filter, COMPARISON

Euro FX 5 minutes bar, today and yesterday

In Blue the bollinger band calculated with the average price (high + low / 2) at 89 periods.

The red bands represent my method to filter the data with a centered T3 Filter with 89 periods (it uses future data to erase the lag, so the last n-bar in blue are forecasted with autoregression algorithm and might change)

More Details about the filter i use:

T3 is a high order low pass denoiser made of six-pole nonlinear Kalman filter . The Kalman filter is an efficient recursive filter that estimates the state of a linear dynamic system from a series of noisy measurements (from wiki)

Inputs of the Filter:

Periods T3 = Periods for Tillson's T3 filter
Slope T3 = Slope for Tillson's T3 filter (0.7 to 0.83 for usual value) (Higher value mean more dynamic filter) i use 0.7 that is perfect and fit better the data.

Weakness ahead

A closing triangle, and i suspect the US markets will go down the first part of this week.
The n100 is going to break the 1466 level today.

Sold S&P500 unit at 957

An excellent example of trading using only price levels.

I bought at 930 at the support of the internal price envelope, sold today after the employment data at the resistance of the main price envelope.

I plan to be a buyer again near the midpoint at 947.

Fooled by Randomness

Many people and economists believe that there is no skill in speculation. More precisely they think that most investment and speculative success is indistinguishable from the result of blind luck. The more dogmatic ones say that Warren Buffet is just lucky, not good. For a good read on this subject I urge you to get Nassim Taleb's terrific book "Fooled by Randomness".

I think that successful speculators have a tangible skill, although it is not a skill that can be taught. Their skill is the ability to sense the direction in which the crowd ("flock" and "herd" are perhaps more informative images) of other speculators is about to turn, just at the point this turn is starting.

940

Support 888
Resistance 906
Resistance for this week 940
Support for this week 871

About "Trading with Cycles"

In theory, trading with cycles it is an easy job, buy at the start and sell at the top of the cycle.

This is just a variation of the old buy-low, sell-high concept.

In practice, trading with cycles is very more difficult. The very existence of market cycles is ephemeral and one must jump on them quickly to take advantage of any market inefficiency that they represent.

In addition, there are a number of other conditions that make trading with cycles more difficult, perhaps to the point that the real question is "when should I NOT trade with cycles?".

One of the purposes of measuring the market cycle is to determine market inefficiency because of a short term coherence. If there is a coherence in prices, we can expect that coherence to continue - at least for a short while into the future so we can close in profit our trade. We can then identify this cycle component as the "signal" we are trying to exploit.

It is possible that a perfectly measured cycle indicates to go short but if the market is in a bull trend, it is easily possible that the trend is so strong that it completely nullify the advantage of the cyclic trade. This happens often even on an intraday basis.

It is very important to estimate correctly the intensity of the trend; if there is one then trade only in the direction of the trend using an estimation of the istantaneous cycle and buying at its start or selling short at its top. In the following example you can see a downtrend channel with cycles modulating it. Sell short at the top of each cycles in a well defined downtrend of the EURO FX daily time frame.

I'll explain how to estimate the duration of the istantaneous cycle soon, in this example the cycle duration estimated was 16 days.

Welcome

This blog will be used by me to show my thoughts about the stock markets.
I'll explain what I see ahead for the stock, derivatives and various commodity markets

In detail:

E-MINI S&P500 future
E-MINI Nasdaq 100 future
EURO FX
USD GBP FX
E-MINI CRUDE OIL
MINI EUROSTOXX 50
DAX FUTURE
SPMIB40

Various stocks from the Nasdaq and Nyse