Gdx

[Pascal]

Whatever wig we put on the doll, she does not look pretty right now.
I plan to reduce some long positions if we have an afternoon bounce with declining MF.
The GDX RT model was correct to turn short two days ago, but in the past, GDX used to surprise us with wild unexpected moves. This is the main reason why I keep trading non-leveraged positions.
So a reversal could still happen.


Pascal

13648

[Billy]

.We still don't have enough experience and data from the RT model. But it indeed looks extremely precise. Even small whipsaws haven't been very painful.

We still need to see how the current RT short trade will end. I’m still fearful that the final capitulation target is Monthly S3 (47.50) but it will be out of the wy next Monday.

My inner feeling tells me that it's best to wait in cash or with very small-size positions when the RT and EOD models diverge. So far, the only backtested model is the EOD and I think it provides reliable edges for the EOD traders. It should have priority until enough data will allow for a backtest/optimization of the RT model. Perhaps the RT MF is the tool many awaited for position-sizing management, even within EOD positions.

As I finish writing this message, GDX regained the intraday VWAP at 48.34 with a moderately rising Money Flow. Today’s buyers are in control at this exact moment.
Billy

[xr-3609]

Whatever wig we put on the doll, she does not look pretty right now.
Pascal
13648

Yes, the doll's lipstick is a mess and no one wants to dance with her. I am hoping there is a chance that after the end of the Quarter - she will look like a hot date!

Greg

[Pascal]

.We still don't have enough experience and data from the RT model. But it indeed looks extremely precise. Even small whipsaws haven't been very painful.

We still need to see how the current RT short trade will end. I’m still fearful that the final capitulation target is Monthly S3 (47.50) but it will be out of the wy next Monday.

My inner feeling tells me that it's best to wait in cash or with very small-size positions when the RT and EOD models diverge. So far, the only backtested model is the EOD and I think it provides reliable edges for the EOD traders. It should have priority until enough data will allow for a backtest/optimization of the RT model. Perhaps the RT MF is the tool many awaited for position-sizing management, even within EOD positions.

As I finish writing this message, GDX regained the intraday VWAP at 48.34 with a moderately rising Money Flow. Today’s buyers are in control at this exact moment.
Billy

Yes, you are right about what has been back-tested.

As a side note, while waiting I updated the Futures and ETF sections of the web site.
It is interesting to note that the S&P, QQQ and Dow futures were bought during the pull-back while the US$ was still under selling pressure.


Pascal

[davidallison@gmail.com]

The talking heads on CNBC at about the time GDX hit 48.05 were saying how the gold trade was over. I took this as an extreme bullish sign and added to my position! :-) dave

[DJones]

Whatever wig we put on the doll, she does not look pretty right now.
I plan to reduce some long positions if we have an afternoon bounce with declining MF.
The GDX RT model was correct to turn short two days ago...
13648

Since EOD and RT have diverged recently, and since RT is bouncing around a bit between long and short (expected, given its short-term look), at any given point either now or in the future we will be able to look back and say that either the EOD or RT was "correct." But for now there really isn't clear direction.

Or is there?

1) Both EOD and RT are long, right?
2) About 12 days ago began a divergence between GDX MF and price. That divergence continues. Money has moved in, and the price has moved down.

If MF has an impact on pricing - eventually - and I believe it does, why would we not be staying long here?

[Pascal]

Since EOD and RT have diverged recently, and since RT is bouncing around a bit between long and short (expected, given its short-term look), at any given point either now or in the future we will be able to look back and say that either the EOD or RT was "correct." But for now there really isn't clear direction.

Or is there?

1) Both EOD and RT are long, right?
2) About 12 days ago began a divergence between GDX MF and price. That divergence continues. Money has moved in, and the price has moved down.

If MF has an impact on pricing - eventually - and I believe it does, why would we not be staying long here?

The main issue is that we do not know if people buying/selling do that because of a short or long term view.

As Billy suggested, we might be able to "modulate" positions using the RT model while keeping the Longer term view with the EOD model.


Pascal

[Billy]

Since EOD and RT have diverged recently, and since RT is bouncing around a bit between long and short (expected, given its short-term look), at any given point either now or in the future we will be able to look back and say that either the EOD or RT was "correct." But for now there really isn't clear direction.

Or is there?

1) Both EOD and RT are long, right?
2) About 12 days ago began a divergence between GDX MF and price. That divergence continues. Money has moved in, and the price has moved down.

If MF has an impact on pricing - eventually - and I believe it does, why would we not be staying long here?

1) No. EOD is long and RT is short. The RT will cover its short either :
- at 0% + porosity or
- at average MF + porosity if it trades below average – porosity at one point in time.

2) Nobody’s talking here about exiting the long EOD position prior to a confirmed exit signal at the close of the day or before hitting the stop.
Billy

[DJones]

1) No. EOD is long and RT is short. The RT will cover its short either :
- at 0% + porosity or
- at average MF + porosity if it trades below average – porosity at one point in time.

2) Nobody’s talking here about exiting the long EOD position prior to a confirmed exit signal at the close of the day or before hitting the stop.
Billy

1) Thanks. I keep forgetting that the RT message is based on EOD position.
2) I see that I misread Pascal's comments. Lightening up is indeed different than exiting, and from his reply I understand his thinking to be to use the RT's short position as a reason to reduce his EOD long positions.

[roberto.giusto]

If there's somenthing I like of today's price action is that it looks like a bear trap.

I was afraid and wondering if large players would have set one before deciding to shoot higher, let's hope they have had enough with today's move.

Regardless of the final outcome of this trade, I must say I am impressed by the location of our stop loss compared to the low of today.

[Billy]

If there's somenthing I like of today's price action is that it looks like a bear trap.

I was afraid and wondering if large players would have set one before deciding to shoot higher, let's hope they have had enough with today's move.

Regardless of the final outcome of this trade, I must say I am impressed by the location of our stop loss compared to the low of today.

I agree with the bear trap scenario. We are witnessing the usual “false then fast move in the opposite direction”.

The initial ATR–based stop (47.94) was computed 4 days ago when ATR% was higher than today. Because of the declining volatility during the 3-day slide, it became harder for GDX to hit the stop at its extreme move down compared to history. If a prolonged sell-off was developing, ATR would likely have risen and GDX would have hit the stop today. Remember that only 5% of trades need to be exited on a stop trigger before a model signal change. This mostly happens in panic selling or buying with exploding volatility.

The lessons are:
1) ATR% is key to risk management of a position and central to the robots and multi-pivot risk methodology.
2) Pascal is one of the best back-testers on earth and today’s action relative to the stop can only further improve our confidence in the system’s rules that he has optimized.
Billy

[Pascal]

1) Thanks. I keep forgetting that the RT message is based on EOD position.
2) I see that I misread Pascal's comments. Lightening up is indeed different than exiting, and from his reply I understand his thinking to be to use the RT's short position as a reason to reduce his EOD long positions.

I was more thinking about a divergence in the afternoon with prices moving higher and MF not following.
This was not the case and hence nothing has changed for me.
We can see today that MF and Price had identical moves.


Pascal

[DJones]

I was more thinking about a divergence in the afternoon with prices moving higher and MF not following.
This was not the case and hence nothing has changed for me.
We can see today that MF and Price had identical moves.

Pascal

Can't I simply take confidence in being long by noting the divergence between MF and price over the last 12 days?

[Pascal]

Can't I simply take confidence in being long by noting the divergence between MF and price over the last 12 days?

Yes, and by the fact that when we crossed over the average in the past, this resulted in good trades.
Some weeks ago I produced the same figure but for a much longer period.


Pascal

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