Here Comes The Bounce? - May 9, 2012

[Billy]

Here Comes The Bounce? - May 9, 2012
The setup is unchanged for IWM, waiting for the short entry limit of 79.81 to be hit on a rebound. I would be light with position-size and leverage because yesterday has the looks of an intraday reversal from a potential bottom. The lows of the day briefly undercut the April 4th low by only a few cents before turning higher on strong MF and volume, closing above the 3-day VWAP (blue line (79.06). This is tasting like selling exhaustion with another fast move from a failed breakdown move. Monthly S1 (78.41) is now the clear support reference and a close today above it would comfort the potential bottom scenario.

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GDX keeps acting like a falling knife but the GDX robot’s LT/ST settings remain neutral and are advising to stay in cash.

Quarterly S2 (41.95) is a serious candidate for offering the launching pad nessecary for a much awaited snapback rebound. The last consolidation was broken at Quarterly S1 (45.75) and Quarterly S2 is a logical temporary target for this selling wave.

Today’s porosity for the RT model is 0.092%.
Billy

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[TraderD]

Here Comes The Bounce? - May 9, 2012

GDX keeps acting like a falling knife but the GDX robot’s LT/ST settings remain neutral and are advising to stay in cash.

Quarterly S2 (41.95) is a serious candidate for offering the launching pad nessecary for a much awaited snapback rebound. The last consolidation was broken at Quarterly S1 (45.75) and Quarterly S2 is a logical temporary target for this selling wave.

Today’s porosity for the RT model is 0.092%.
Billy


Hi Billy,

How does a GDX MF climb from a bottom of -1.0% to -0.6% at the close yesterday bode with a gap down below QS2 at the open today? Would you say it ain't over till the fat lady starts to sing (at -1.45%)?

Trader D

[Pascal]

Hi Billy,

How does a GDX MF climb from a bottom of -1.0% to -0.6% at the close yesterday bode with a gap down below QS2 at the open today? Would you say it ain't over till the fat lady starts to sing (at -1.45%)?

Trader D

It is pretty difficult to keep a clear head when there is a conflict between traders who expect a bounce - and trade a bounce during the day - and overnight news from abroad. The easiest is to wait for a buy signal. If it is a weak buy signal, I'll again buy leaps using "stop loss" money. If it is a strong buy, I'll buy GDX without leverage. However, I still expect a bounce for US markets. It is not like Lehman: I believe that funds have been prepared/protected against a potential market/Euro collapse and they know that the FED is back-stopping everything. I will change my mind when I see -400 points on the Dow in one day.


Pascal

[Pascal]

The GDX RT has issued a BUY signal


Pascal

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[TraderD]

It is pretty difficult to keep a clear head when there is a conflict between traders who expect a bounce - and trade a bounce during the day - and overnight news from abroad. The easiest is to wait for a buy signal. If it is a weak buy signal, I'll again buy leaps using "stop loss" money. If it is a strong buy, I'll buy GDX without leverage. However, I still expect a bounce for US markets. It is not like Lehman: I believe that funds have been prepared/protected against a potential market/Euro collapse and they know that the FED is back-stopping everything. I will change my mind when I see -400 points on the Dow in one day.

Pascal

The FED is clearly not listening to traders' wishful thinking and only they know when it's time to change the tune from "No QE" to "Now QE". The part that I'm pondering is whether there is any real smart money left out there that is able to figure out where to put stake in the ground for accumulation/distribution. We could be following ghosts otherwise.

Trader D

[Pascal]

The FED is clearly not listening to traders' wishful thinking and only they know when it's time to change the tune from "No QE" to "Now QE". The part that I'm pondering is whether there is any real smart money left out there that is able to figure out where to put stake in the ground for accumulation/distribution. We could be following ghosts otherwise.

Trader D

As far as I can tell, this is an oversold bounce. Nothing says that it is sustainable. So yes, maybe ghosts!


Pascal

[pdp-brugge]

Am I correct to conclude that the PM MF will go LONG if the MF remains above 0 at the close today?

[Pascal]

The EOD GDX MF will buy if we stay above Average + Porosity (= 0.07%) by the close.


Pascal

[Billy]

The EOD GDX MF will buy if we stay above Average + Porosity (= 0.07%) by the close.


Pascal

As a reminder, the GDX robot will decide to go long or stay in cash at tomorrow’s open, depending on the LT/ST settings.
Billy

[pdp-brugge]

The triggervalue for the PM MF is now clear to me.
Thanks.

What about the 20DMF?
At what level will the 20DMF issue to buy signal?
Sorry for asking but I want to be sure...

[Wei]

Looking at the below graph, it looks like no QE 3 so far, which is bearish for equity market. But of course it can change any minute (the graph is updated every two weeks. Choose 1 yr and redraw graph to see the details).

http://research.stlouisfed.org/fred2/graph/?id=BASE


As far as I can tell, this is an oversold bounce. Nothing says that it is sustainable. So yes, maybe ghosts!


Pascal

[Wei]

Hi Billy,

"The last consolidation was broken at Quarterly S1 (45.75) and Quarterly S2 is a logical temporary target for this selling wave."

I am wondering if the above statement can be generalized in your experience. ie. if consolidation happen @ [Q/M/S]N, then a likely support/resistance will occur @ the corresponding N[+/-]1 level.

Thanks.

[vfc10us]

I think it's time to finally buy GDX. It has retraced 50% of the move from the 2009 low to the 2011 high. If today's lows don't hold in the next days I would guess next good buy point for GDX is at around $36, which happens to be near the h&s target from the weekly chart.
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[Pascal]

The triggervalue for the PM MF is now clear to me.
Thanks.

What about the 20DMF?
At what level will the 20DMF issue to buy signal?
Sorry for asking but I want to be sure...

The 20DMF Buy signal would be on a close above on OB/OS above 30.
A 20DMF Cash signal would occur if we cross above 0.11% before the buy signal is issued.
As far as I can see, a Cash signal has higher probabilities than a Buy signal.
However, I expect some last minutes selling as day traders - who have been long - leave the market by the close.
So the 20DMF would probably stay short tomorrow.


Pascal

[Billy]

Hi Billy,

"The last consolidation was broken at Quarterly S1 (45.75) and Quarterly S2 is a logical temporary target for this selling wave."

I am wondering if the above statement can be generalized in your experience. ie. if consolidation happen @ [Q/M/S]N, then a likely support/resistance will occur @ the corresponding N[+/-]1 level.

Thanks.

When humans used to program their own inventory plans, it was fairly reliable. We can just hypothesize that modern algos were build with that experience. Anyway, the longer the calendar period of the support/resistance, the more important it is. We still have the massive resistance of YS1+SS1 (44.77) waiting before QS1 (45.75) could be retested. Without that longer timeframe hindrance, QS1 would have become a logical target.
Billy

[pdp-brugge]

Pascal,

The 20DMF will go in BUY mode if the OB/OS is above -30 end of day, correct?
What is today the level of porosity for a 20DMF CASH signal?

PdP

[Pascal]

Pascal,

The 20DMF will go in BUY mode if the OB/OS is above -30 end of day, correct?
What is today the level of porosity for a 20DMF CASH signal?

PdP

The porosity level is fixed at 0.11%. I did not back-test a variable porosity level.
If we cross over 0.11% at the close while the OB/OS stays below +30 at the close, then we turn neutral. If the OB/OS crosses above +30 by the close, then we turn to Buy mode.


Pascal

[pdp-brugge]

Sorry to ask again, but is the OB/OS trigger not a move above -30 (minus 30) ?

[Pascal]

Sorry to ask again, but is the OB/OS trigger not a move above -30 (minus 30) ?

The OB/OS signal allows to enter a "Short protected" mode when the OB/OS crosses below -30. This mode allows to force a BUY signal if we cross above OB/OS +30. This rule allows to enter a buy signal even when the OB/OS does not enter the oversold territory but bounces off from "close to oversold." This bounce is registered when OB/OS crosses above +30. The move between -30 and +30 is usually very fast, because this occurs when the whole market moves up and hence, all the sectors move up.

If the OB/OS for example comes down to -25 but then bounces from that level and above +30, then no Buy signal can be issued.


Pascal

[canucck]

Billy,

Would you mind explaining how these are set? I think that I saw in previous posts that they are set at the end of the period, but then again, with software, these could easily be updated dynamically on a day to day basis. Can you educate me (apologize for my ignorance here) on how they are calculated. Thanks

Mike M

[Billy]

Billy,

Would you mind explaining how these are set? I think that I saw in previous posts that they are set at the end of the period, but then again, with software, these could easily be updated dynamically on a day to day basis. Can you educate me (apologize for my ignorance here) on how they are calculated. Thanks

Mike M

It’s all explained in that thread.
http://www.effectivevolume.com/showthread.php?3453-Tutorial-Intro-Path-Of-Least-Resistance&highlight=path+resistance
Billy

[canucck]

thanks for the info