Sunday, October 19, 2008

Bermuda Triangle?

43 comments by xTrenders :

dhw said...

Whats your target after the triangle resolves? October 2002 lows?

Atilla M. Demiray said...

760 on spx

Atilla M. Demiray said...

if it resolves to the downside

apconcen said...

atilla,

1) confused?.... u said triangles like these that take a while to resolve usually fake out 1st. are you saying you expect it to resolve to the upside 1st in a fake move then reverse and 'resolve' to the downside to the projected target ?

2) u said we are range bound this week between 850 and 980...which target u expect for us to reach 1st as 980 is closer than the dowside range ?

3) can u give a projected REMAINING range target for the triangle...eg 1st up to 980 then down to 895..then up to 925..etc...etc..etc...i know its speculative but can u try ?

hadman said...

What indicator is RSI_BS?

Thanks

tommy t said...

everyone watching the triangle now...this is gonna be interesting this week. If it does blowout to the downside, I don't expect it to stay down long either. We could go to lo 7,000ish and within a week after that be back up here. To the upside, fireworks also.

GWBush said...

Any wild guess as to when the triangle will break?

Atilla M. Demiray said...

apconcen said...

atilla,

1) confused?.... u said triangles like these that take a while to resolve usually fake out 1st. are you saying you expect it to resolve to the upside 1st in a fake move then reverse and 'resolve' to the downside to the projected target ?

2) u said we are range bound this week between 850 and 980...which target u expect for us to reach 1st as 980 is closer than the dowside range ?

3) can u give a projected REMAINING range target for the triangle...eg 1st up to 980 then down to 895..then up to 925..etc...etc..etc...i know its speculative but can u try ?

Sunday, October 19, 2008 11:55:00 PM EDT

--------------------------

Whatever direction it breaks out first, we will reverse in the opposite direction. So I am not saying the first breakout which will turn into a fake out will be on the upside. What ever it will be, it should reverse soon after.

Yes I think we are in a range until earnings and those toxic shits are resolved. This doesnt mean we will hit the lower boundary or upper boundary that may distord the triangle. After all i dont like that triangle at all lolllllllllllllll

Atilla M. Demiray said...

hadman said...

What indicator is RSI_BS?

Thanks

Sunday, October 19, 2008 11:57:00 PM EDT

-------------

RSI_BS = RSI with buy and sell

those green and red arrows being buy / sell

they are the range crossovers

Atilla M. Demiray said...

GWBush said...

Any wild guess as to when the triangle will break?

Monday, October 20, 2008 12:00:00 AM EDT

------------------

Yes, after I have my lunch tomorrow...

Atilla M. Demiray said...

kidding

Lawrence Chiu said...

Atilla, Can you explain why COT data was bearish? Why would the non-commercials adding to their long positions be bearish? Don't they (pros) have the best track record?

ARAK said...

non-commercials are small fry

apconcen said...

ok Atilla..i almost get u...even if u dont like the triangle..u gave a range...so do u think we hit the upper or lower boundary 1st of the range you gave earlier?

Atilla M. Demiray said...

non-reportable are small suckers that classify as class-1 sucker

non-commercials are large suckers, they are class-2 wall street suckers... they are said to follow trend but evidently they must be focusing on that 120 year long trend on SPX these days

commercials are smart money, they make the trends. They shorted SP and ES big freaking time right before the crash, they did not covered yet. That is why COT is bearish. Those whales must cover to turn the ship.

Atilla M. Demiray said...

my gut says we test upper first but i wouldnt bet a penny on this

PCP said...

Atilla,

re: COT data

I have found that it is not as straight forward as that. If it was, a chump like me could be doing just as well as you ;-)

From my analysis, the small guys are the best fades. When their position as percentage of open interest goes 2 standard deviation from long term moving average, it is time to fade. The large specs are also a fade in the same way. From that analysis, they are going in the opposite direction right now, which is why I prefer cash position in that index. I would expect a pop to shake out the small traders from their short position and encourage the large specs. The commercials will likely add to their short position while this happens. Then the setup is complete to fade both.

Atilla M. Demiray said...

I look for big changes in commercial positions. That is as good as rocket science.

Narayana said...

Atilla, will you be looking for commercial net short contracts to hit 0 (from the current -35k contracts) to signify that a bottom is in?

PCP said...

COT data is good as gold if one knows how to extract meaningful information from it. Occasionally, you don't really need any analysis, such as last couple of weeks.

BTW, your description of large-spec is spot on. Those are the trend-chasers playing with other people's money. Not a good combo in this market. I don't expect the down trend to relent until they turn bearish.

I actually have bullish signal on BKX based on these data. I am a little afraid to follow it but will nibble. Wish me luck ;-)

ARAK said...

Atilla,

The following data is conflicted. Class 2 suckers are long on the SPZ where the retails are short. In the E-minis Class 2 suckers are short whereas retail is long. How do you see this being played out?

http://4.bp.blogspot.com/_rl2Lggl1_es/SPwQf-u-bXI/AAAAAAAAAAo/3J1TH16Me68/s1600-h/SP.jpg

S&P 500 STOCK INDEX - CHICAGO MERCANTILE EXCHANGE Code-138741
Commitments of Traders - Futures Only, October 14, 2008
-------------------------------------------------------------------------------------------------------------------
: Total : Reportable Positions : Nonreportable
:---------------------------------------------------------------------------------------- Positions
: Open : Non-Commercial : Commercial : Total :
: Interest : Long : Short : Spreading: Long : Short : Long : Short : Long : Short
-------------------------------------------------------------------------------------------------------------------
: : (S&P 500 INDEX X $250.00) :
: : :
All : 645,995: 118,351 46,157 3,286 414,933 450,245 536,570 499,688: 109,425 146,307
Old : 645,995: 118,351 46,157 3,286 414,933 450,245 536,570 499,688: 109,425 146,307
Other: 0: 0 0 0 0 0 0 0: 0 0
: : :
: : Changes in Commitments from: October 7, 2008 :
: 34,682: 16,043 2,747 -673 19,559 14,523 34,929 16,597: -247 18,085
: : :
: : Percent of Open Interest Represented by Each Category of Trader :
All : 100.0: 18.3 7.1 0.5 64.2 69.7 83.1 77.4: 16.9 22.6
Old : 100.0: 18.3 7.1 0.5 64.2 69.7 83.1 77.4: 16.9 22.6
Other: 100.0: 0.0 0.0 0.0 0.0 0.0 0.0 0.0: 0.0 0.0
: : :
:# Traders : Number of Traders in Each Category :
All : 196: 46 35 18 81 66 136 110:
Old : 196: 46 35 18 81 66 136 110:
Other: 0: 0 0 0 0 0 0 0:
:----------------------------------------------------------------------------------------------------
: Percent of Open Interest Held by the Indicated Number of the Largest Traders
: By Gross Position By Net Position
: 4 or Less Traders 8 or Less Traders 4 or Less Traders 8 or Less Traders
: Long: Short Long Short: Long Short Long Short
:----------------------------------------------------------------------------------------------------
All : 21.1 27.0 32.1 39.7 18.9 25.9 29.8 38.6
Old : 21.1 27.0 32.1 39.7 18.9 25.9 29.8 38.6
Other: 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

E-MINI S&P 500 STOCK INDEX - CHICAGO MERCANTILE EXCHANGE Code-13874A
Commitments of Traders - Futures Only, October 14, 2008
-------------------------------------------------------------------------------------------------------------------
: Total : Reportable Positions : Nonreportable
:---------------------------------------------------------------------------------------- Positions
: Open : Non-Commercial : Commercial : Total :
: Interest : Long : Short : Spreading: Long : Short : Long : Short : Long : Short
-------------------------------------------------------------------------------------------------------------------
: : ($50 X S&P 500 INDEX) :
: : :
All : 3,189,495: 549,198 715,689 52,462 1,843,847 2,084,624 2,445,507 2,852,775: 743,988 336,720
Old : 3,189,495: 549,198 715,689 52,462 1,843,847 2,084,624 2,445,507 2,852,775: 743,988 336,720
Other: 0: 0 0 0 0 0 0 0: 0 0
: : :
: : Changes in Commitments from: October 7, 2008 :
: 295,485: 54,215 116,476 -31,938 114,935 56,494 137,212 141,032: 158,273 154,453
: : :
: : Percent of Open Interest Represented by Each Category of Trader :
All : 100.0: 17.2 22.4 1.6 57.8 65.4 76.7 89.4: 23.3 10.6
Old : 100.0: 17.2 22.4 1.6 57.8 65.4 76.7 89.4: 23.3 10.6
Other: 100.0: 0.0 0.0 0.0 0.0 0.0 0.0 0.0: 0.0 0.0
: : :
:# Traders : Number of Traders in Each Category :
All : 413: 108 101 44 139 131 271 252:
Old : 413: 108 101 44 139 131 271 252:
Other: 0: 0 0 0 0 0 0 0:
:----------------------------------------------------------------------------------------------------
: Percent of Open Interest Held by the Indicated Number of the Largest Traders
: By Gross Position By Net Position
: 4 or Less Traders 8 or Less Traders 4 or Less Traders 8 or Less Traders
: Long: Short Long Short: Long Short Long Short
:----------------------------------------------------------------------------------------------------
All : 16.5 25.9 25.5 38.4 12.3 24.9 21.2 36.2
Old : 16.5 25.9 25.5 38.4 12.3 24.9 21.2 36.2
Other: 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Derek said...

Hi Atilla,

I believe the surge of HSI this morning is sustainable through afternoon.

Do you think Dow will follow tonight?

Radium said...

atilla m. demiray said...
hadman said...

What indicator is RSI_BS?

Thanks

Sunday, October 19, 2008 11:57:00 PM EDT

-------------

RSI_BS = RSI with buy and sell

those green and red arrows being buy / sell

they are the range crossovers



Ya those of you with the Think or Swim trading platform can add the study. It is called RSI, Wilder with Breakout Signals

Cheers

Dma said...

Atilla

What is your forecast for today

Thanks

johnboy said...

Atilla,

You may recall I mentioned a couple of days ago that I thought a triangle was forming - glad to see that you think so too.

I'm leaning towards the a different arrangement to what I think you've drawn. I think the first upwave of the triangle (wave A in Elliot Wave terms) is the wave that started on Oct 10. Sorry I'm on a business trip and have crappy internet access so I can't draw you a pretty chart. Anyway, the ultimate resolution of the triangle is essentially the same anyway.

Under the scenario I'm thinking is transpiring, wave B of the triangle bottomed at 8750 on the Dow on 16th.

Wave C up could have finished yesterday at just below Down 10,000, but looks a bit shallow, so the door is open for it to keep going higher (but not higher the high registered at the open on the 14th.

Wave D down, like all the other waves, should retrace at least 62% of the previous wave, followed by wave E up, at which point the big downspike should appear, followed almost as rapidly by a bounce that, in all likelihood retraces all of the downspike and then some. If it's an IT bottom then it will be a ball-breaker of an upmove.

If it's simple triangle, it should be complete in the next 2 to 6 trading days.

As you say, it might head-fake us first. In any case, people who stay on their toes and don't over-leverage themselves in a slobbering mass of greed should be able to make some nice profits out of these moves in the next few days. Those who can't move fast will get their head handed to them on a plate.

If it is a triangle occuring with a downspike to an IT bottom, then we should be seeing the talking heads on the idiot box screaming it's the end of the world (even more than last week).

Just my two cents for what it's worth.

I hope this crap internet connection at my hotel doesn't flip out on me - I'm gonna be pissed off if I miss this ride!

johnboy said...
This comment has been removed by the author.
Josh said...

wow that graph looks NOTHING like tim knight' slope of hope graph of the bermuda triangle! good job, real original

Chrys said...

One possibility being overlooked is a breakout to the upside. What if the triangle formation is: AabcdeC with a 150 pt move up from the apex which is around 925.

buylo said...

Atila, would you "chase" the open, SP futures +22, hoping we go higher until say noon, then sell and flip on any sign of a pulback? or is such a move too dependent on luck and being very nimble?

Ofer said...

The breakout (true or false) Will probably not happen before Wednesday, so we have today and tomorrow to trade off of daily support and resistance.

dhw said...

atilla already mentioned that he isn't going to trade the triangle until it breaks, so everybody is on their own until then.

angus said...

TRINAGLE must be the most frequently used word in stock market forums as of late

if everyone's talking, chances are it will happen

I think the VIX is working its way towards the low 50's, then begins its final descent to the abyss

I'll wait for the VIX to come in the next day or two, then buy some deep-in-the-money puts and watch the fall

angus said...

shit, I mean it will not happen

ARAK said...

Angus,

your two posts left me more confused

Winace said...

Hey, just to stir things up ;-)
On to other things……
Regarding technical analysis in general. I do not want to give the impression that I don’t believe technical analysis works (from here forward I will use TA), it most certainly gives you an idea to the potential support and resistance areas within a chart, and a slight advantage to its intentions of direction of movement.

Fundamental Analysis (which will not be reference again) is about as worthless as “Rugby’s” comments (notice I said “about”).
Now, just looking at pure statistical odds and probabilities, and before I go further, there IS a green space on the roulette wheel which means the “house” wins. There IS a green space in securities, but not in indices and ETFs. Regardless, anyone is subjected to those “green spaces” in securities, hence, you will not see me play them. Let me post a brief example, yes, the numbers are NOT exact and there are LOTS of variable which skew these numbers one way or another, but the vast majority of these variable DO NOT skew things in the favor of the average trader.
Let’s take an option contract on QQQQ, assuming a delta of 1.0 (for ease of calculation).

A move of 0.10, in either direction of your entry, on the underlying, would have a percentage odds of 50/50, assuming blind entry. On 10 options contracts, let’s assume you have a $15.00 commission (which is horrific!). The spread (taking the minimal spread) is 0.01. So, to cover the spread and commissions, you need a move of 0.03 in the underlying to break even.
Looking back at the 50/50 move of 0.10 in either direction of a 1:1 risk:reward ratio, you have just dropped your odds to 35:65 for a successful trade capturing 0.10 of the underlying.

Of course, most people are not looking for a 1:1 risk:reward ratio, they are typically taught a 1:3 ratio, or they shoot for more trying for that “home run”. If you make it past the 35% odds risk and get the movement in your direction, you now face a 50/50 for the next 0.10 move, and again for the next 0.10 move to acquire your 3:1 risk reward ratio win. So to recap, 35% chance, then 50%, then 50%. Compiling these numbers, your overall chance of a successful execution falls less than 20%. For simplicities sake, we shall say 20%, or 1 in 5. If you execute 1 in 5 trades successfully with a 1 to 3 risk:reward ratio, you will end up a net loser.

Applying technical analysis, say it increases your chances by 15% of the initial direction (if you good ;-)), takes the initial price movement for break even back to 50:50 (spread and commissions). Looking at a risk:reward ratio of 1:3, this gives you the percentage chance of 2 to the power of 3 (50%, 3 times), which gives you the odds of 1 in 8, simplified to a percentage, 12.5% (the initial 20% quoted above for blind entry was pretty lenient, for this percentage is slightly higher than a pure blind entry).

Before I go further, there is nothing to benefit me in this explanation, I am not pushing any type of trading technique, selling any newsletter, or want anything, of any type, from any one. I simply state these facts to help leverage the field for those who truly want to learn, and to open the minds of those who are narrowly focused and blinded by the propaganda of the news and “most” trading educational tools. Com’ on, think about it, if someone knows how to trade for profit EVERY trade, you think they are going to publish a book to teach you how to take profits from them?

Most traders will admit, markets do NOT trade in one direction only, this is the key to trading consistently profitable. Everything in trading is a trade off, you reduce risk, you reduce reward, but increase % chance of being successful. There are directly proportionate and indirectly proportionate trade-offs concerning these variables. Let’s go back to the 35% blind entry odds.
If you were to compound a position, via cost averaging down (buying more at a lower cost) at a rate that makes up for the previous positions loss, you would have multiple chances of executing your 35% chance of success.
Calculators and various tools help pin-point your numerics within the trade, but for a quick example, lets use the Q’s once again.
You initially purchase 10 contracts, you have 35% chance of a 0.10 move in your direction to break even. It moves against you 0.10, you double the position, you now have a 35% chance of it moving in your direction to break even, and so on , and so on.
The capital requirements are more extensive, but the combination of position multipliers regulates this cost, along with delta and gamma if you are using options. My typical trade has 20 tiers of entry, hence 35% chance, 20 times. There is a lower return, and much greater draw-downs, but the chance of being correct and profitable is very high. The use of leveraged options gives me an average return of 10-30% of capital utilized in the trade.

This is what you are playing against, professionals with huge amount of capital, capable of averaging down a position, to swing the retrace, to snare the speculator. It is all in the numbers.
There is someone else you know that calculates odds and probabilities. He also leverages down into a position, cost averaging down, until his trade is correct. I will not mention names, but you probably have an idea who that may be.
There is another individual who states, let the market prove you right. Hmmmm… I let the market prove me wrong, but just how wrong can I be? Does he do this successfully? Sure he does, but you got to be on top of your game! Don’t fall asleep and execute the exit on first sign of weakness without emotion. It works, but, it is the faster sheep approach.

OK, enough for now, I see a potential short entry coming up, to fade this incline!

angus said...

arak, I'm saying that the chance of a triangle forming is low given how many people expect it.

I think a more likely scenario is a volatility squeeze with an upwards bias for a day or two, then a drop.

I think in ordet to have a drop at this point, a sufficient number of traders must be sucked in to the upside first.

dhw said...

cboe equity calls to puts running better than 2 to 1. Could be post expiration adjustments, but still that's a lot of bullishness.

Mr. Lockwood said...

no one comes back from the bermuda trianlge! :O

kam said...

Atilla, are you day trading anything today?

wandahl said...

We just had a mini trangle on SPX !?

Trace said...

winace is writing books here on xtrends

PCap said...

Blogger kam said...

Atilla, are you day trading anything today?

---------------------------------

New post, see main blog:
http://xtrends.blogspot.com/

Gozen said...

Atilla usually doesn't day trade from what I seen. Sol daytrades.