One Year To Nowhere

[Expat1 971]

Even based on just this one indicator...and, it's only one and not the most reliable one(although one of the top 5), we need another 30% drop from current levels just for a run of the mill mean reversion alone(which will basically mean S&P500 ~1300), not even talking about undervaluation.

and that, works for me.

I watch 4-5 general indicators, but these two generally provide the best shock value to ordinary investors as sort of a real time snapshot of overall market valuations relative to history.

[OriZ 3,157]

and that, works for me.

I watch 4-5 general indicators, but these two generally provide the best shock value to ordinary investors as sort of a real time snapshot of overall market valuations relative to history.

I still think it will go even lower, though.

Here's something else that ties into our earlier convo

http://www.bloomberg.com/news/articles/2016-01-15/it-took-7-months-to-unwind-2-years-of-global-stock-gains-chart

[Expat1 971]

I still think it will go even lower, though.

Here's something else that ties into our earlier convo

http://www.bloomberg.com/news/articles/2016-01-15/it-took-7-months-to-unwind-2-years-of-global-stock-gains-chart

I like that article.

It ticks me off when "advisors" (remember the guy who advised me to go 60-40 stocks to bonds last summer? That f---er is supposedly my official assigned Vanguard 'advisor'!) don't or can't break down market cycles, explain valuations, explain what happens to bonds when capital dries up or interest rates move around, and instead base their entire policy on keeping you in the market with no goal that I can determine but that up or down, their firms can rake in their management fees.

The sooner we all realize that they get paid no matter what happens to your money and the more of your money they keep invested the more they collect.

Financial advisors are NOT rewarded for good advice, they are rewarded for making the sell.

Edited January 16, 2016 by Expat1

[OriZ 3,157]

I like that article.

It ticks me off when "advisors" (remember the guy who advised me to go 60-40 stocks to bonds last summer? That f---er is supposedly my official assigned Vanguard 'advisor'!) don't or can't break down market cycles, explain valuations, explain what happens to bonds when capital dries up or interest rates move around, and instead base their entire policy on keeping you in the market with no goal that I can determine but that up or down, their firms can rake in their management fees.

The sooner we all realize that they get paid no matter what happens to your money and the more of your money they keep invested the more they collect.

Financial advisors are NOT rewarded for good advice, they are rewarded for making the sell.

"You can't predict the market" is one of the biggest myths that was created by those companies so that you invest with them. And sadly, it has most people convinced that that is true. I'm not saying you can predict every single move on every single time frame, but you can definitely easily know when is a good time to invest and when is a bad one. But they will tell you and their ads will tell you that you can't predict it so that you give them your money, thinking they can manage it better, pay them the fees, and in the end make less than if you had just bought an ETF. It's not that hard to make money in a rising market, which is what it does most of the time, any child can do that. The key is to avoid capital losses when the market takes a break from it.

Speaking of which, 19 out of 19 times the economy went into a recession when industrial production was down 8 outta 12.

Latest figures = number 10.

Edited January 16, 2016 by OriZ

[Expat1 971]

"You can't predict the market" is one of the biggest myths that was created by those companies so that you invest with them. And sadly, it has most people convinced that that is true. I'm not saying you can predict every single move on every single time frame, but you can definitely easily know when is a good time to invest and when is a bad one. But they will tell you and their ads will tell you that you can't predict it so that you give them your money, thinking they can manage it better, pay them the fees, and in the end make less than if you had just bought an ETF. It's not that hard to make money in a rising market, which is what it does most of the time, any child can do that. The key is to avoid capital losses when the market takes a break from it.

Speaking of which, 19 out of 19 times the economy went into a recession when industrial production was down 8 outta 12.

Latest figures = number 10.

Yeah I'm a little worried about that

[X Factor 1,112]

Managed to save it at the close.

Because of this at 3:58 pm right before the close I sold some Iron Condors, SOLD - IRON CONDOR SPX (Weeklys) JAN4 16 1940/1950/1780/1770 CALL/PUT @2.40. With the 3 day weekend that will cause time decay and the expected move next week of about 70 spx points I will close the position out for 1.15 for a bit over 50% profit or exit Thursday if profit target isn't met

This strategy has a probability of 76% success if waiting for it to expire worthless by end of next week. But by taking profits around 50% my probability of success is considerably higher somewhere in the 90% plus.

Edited January 16, 2016 by X Factor

[X Factor 1,112]

OK. I thought you were talking about Prechter cause he also seems to get a ton of heat these days.

Basically what I am looking for now is some "flush panic". I think it will happen in the next week or so. I need a day that starts down at least 3-4%, and then closes much higher. With the VIX in the high 40's. I think that will give us a better bottom that could last for several weeks and create the range I mentioned earlier.

I love" flush panic". It is perfect to sell naked and collect on premium. On Monday August 24, 2015; I SOLD 1 contract - SPX SEP 18 1500 PUT @10.10 naked. Then the next day I bought it back BOT +1 SPX SEP 18 1500 PUT @3.70. Making over $600 profit on premium selling (I did one contract because the margin for a naked SPX contract is extremely high). I also sold a bunch of NFLX and SPY options naked and purchased them back in a few hours. It was one of my most profitable 2 days of the year.

Edited January 16, 2016 by X Factor

[OriZ 3,157]

Yeah I'm a little worried about that

There is no need to be worried. A recession is necessary. I never understood why when I would have conversations with certain people I knew, they would call me a vulture, just for knowing how to predict it, not worrying about it, and making a profit off of it. The world cannot move in a straight line. We make progress by taking two steps forward and one step back. It is how it works. Without the step back, we would not have the advances we have. Crises are necessary.

And I'll quote Hussman:

Despite current market and economic conditions, don’t imagine for a moment that either our disposition or our outlook for the year ahead is negative. To the contrary, our outlook is one of historically-informed optimism, enthusiasm, and confidence. It’s just that those assessments relate to our own discipline and not to the market in general. That discipline is grounded in a focus on valuation and market action, openly adapted in mid-2014 to further elevate the role of market internals, and validated over a century of market cycles, including the most recent one. If anything, we have even greater confidence in our discipline than we had at either the 2000 or 2007 peaks. That confidence turned out to be a good thing for us, even if the reality of the situation didn’t support the same assessment for the economy or financial markets as a whole.

Keep your money safe, keep your family informed and safe, make sure they do everything they can to keep their jobs; it will get ugly out there. But with it, will come many many opportunities.

I want to add to the long term chart posted by Expatty before. That was a nominal Dow chart. However, if we look at the Dow chart priced in gold(this is the chart you would have seen in most of the last century had you looked at a paper while we were still under the gold standard) it looks more like this:

This is how you value stocks in real money. Notice something interesting - the FED was created in 1913. Look at how much volatility it added for no real net progress compared to the preceding period.

Here is a more recent look:

http://www.macrotrends.net/1378/dow-to-gold-ratio-100-year-historical-chart

At the very core of technical analysis, the basics of the basics, before you add all the trend lines, momentum indicators, moving averages and other tools, is trend definition. A trend that is moving up is defined by higher highs and higher lows. A downward trend has lower highs and lower lows. If a trend has only one of those, then it is just moving sideways. Normally, a break of the last low without making a higher high means the primary trend has changed to a downtrend(and vice versa). What we got yesterday with the S&P and in recent months with most indexes is textbook trend changes that have not occured since 2009. The market has not made lower highs and lower lows throughout the big "recovery" rally. Now it has. This is a major game changer in and of itself. Not even a need for Bollinger, RSI, MACD, or anything else.

Because of this at 3:58 pm right before the close I sold some Iron Condors, SOLD - IRON CONDOR SPX (Weeklys) JAN4 16 1940/1950/1780/1770 CALL/PUT @2.40. With the 3 day weekend that will cause time decay and the expected move next week of about 70 spx points I will close the position out for 1.15 for a bit over 50% profit or exit Thursday if profit target isn't met

This strategy has a probability of 76% success if waiting for it to expire worthless by end of next week. But by taking profits around 50% my probability of success is considerably higher somewhere in the 90% plus.

Yup, definitely a 70 point move next week. You'll do fine.

I love" flush panic". It is perfect to sell naked and collect on premium. On Monday August 24, 2015; I SOLD 1 contract - SPX SEP 18 1500 PUT @10.10 naked. Then the next day I bought it back BOT +1 SPX SEP 18 1500 PUT @3.70. Making over $600 profit on premium selling (I did one contract because the margin for a naked SPX contract is extremely high). I also sold a bunch of NFLX and SPY options naked and purchased them back in a few hours. It was one of my most profitable 2 days of the year.

Dude, you have bigger balls than me, and trust me I do just fine(most people wouldn't mind if my average monthly return was their annual). I will never sell an option naked. never. I will buy an option naked, if it is limited to several hours or days, so the theta cannot hurt me. But I will not sell one.

Edited January 17, 2016 by OriZ

[X Factor 1,112]

Dude, you have bigger balls than me, and trust me I do just fine(most people wouldn't mind if my average monthly return was their annual). I will never sell an option naked. never. I will buy an option naked, if it is limited to several hours or days, so the theta cannot hurt me. But I will not sell one.

You should consider selling naked puts if you want to own a stock when the market is near a cycle bottom. Let's say you believe that the market is at a bottom and you want to own a stock like NFLX for example. Let's say it is currently $105. If you want to own it at $100 sell the $100 puts naked and collect some premium. If the stock closes below $100 at the expiration you chose, you get assigned NFLX at the $100 price. If NFLX doesn't close below $100 at expiration you get to keep the premium. It is a win win situation because you want to buy the stock anyway. This is a strategy I used in the past for my Roth IRA. Now I am nearly 100% cash in my IRA.

Now in regards to the selling of SPX naked options. I sell very far out of the money when the vix goes to crazy level like August 24, 2015. It is a calculated risk. I just want the SPX to do a quick bounce and the premium on the puts drop quickly in a matter of hours. I don't do it all the time but just when there is a "flush sell" and the index reached a support level on the weekly chart

Edited January 17, 2016 by X Factor

[OriZ 3,157]

You should consider selling naked puts if you want to own a stock when the market is near a cycle bottom. Let's say you believe that the market is at a bottom and you want to own a stock like NFLX for example. Let's say it is currently $105. If you want to own it at $100 sell the $100 puts naked and collect some premium. If the stock closes below $100 at the expiration you chose, you get assigned NFLX at the $100 price. If NFLX doesn't close below $100 at expiration you get to keep the premium. It is a win win situation because you want to buy the stock anyway. This is a strategy I used in the past for my Roth IRA. Now I am nearly 100% cash in my IRA.

Now in regards to the selling of SPX naked options. I sell very far out of the money when the vix goes to crazy level like August 24, 2015. It is a calculated risk. I just want the SPX to do a quick bounce and the premium on the puts drop quickly in a matter of hours. I don't do it all the time but just when there is a "flush sell" and the index reached a support level on the weekly chart

Thing is, I don't do stocks. I do options and futures. That is it. Stocks are boring. Any child can make money in stocks, there is no challenge there. Selling naked means unlimited losses and I don't do unlimited losses. If the market is at a bottom, I don't touch stocks. I open up synthetic Long futures positions on SPX or SPY.

Edited January 17, 2016 by OriZ

[X Factor 1,112]

Thing is, I don't do stocks. I do options and futures. That is it. Stocks are boring. Any child can make money in stocks, there is no challenge there. Selling naked means unlimited losses and I don't do unlimited losses. If the market is at a bottom, I don't touch stocks. I open up synthetic Long futures positions on SPX or SPY.

I like to make money boring

I have not done synthetic futures positions. I do short the futures but only at certain times according to my trading plan

Yes naked means unlimited loss. But there are times in the market when the panic is extreme and so by exploiting that one can take calculated risks. There are only a few times per year for this. Last year I only did this one time. So far no naked selling this year because there is panic flush.

[OriZ 3,157]

I like to make money boring

I have not done synthetic futures positions. I do short the futures but only at certain times according to my trading plan

Yes naked means unlimited loss. But there are times in the market when the panic is extreme and so by exploiting that one can take calculated risks. There are only a few times per year for this. Last year I only did this one time. So far no naked selling this year because there is panic flush.

I personally use the market as a vehicle to make money. I don't care if some people only feel good about themselves if they feel like they actually invested in something tangible, a company that produces things, etc. I know some people who would never touch what I do only because they really care about investing in an actual company and not playing a zero sum game. I say BS. If the Kardashians make money out of thin air so can I. I feel no guilt, the bottom line is all that matters.

synthetic futures are really easy and that's why I like them. For one you are very leveraged, but at the same time losses are limited, and there is hardly no decay. It requires less margin than regular futures. All you do is buy one option and sell the other side for the same amount. I love using it. Some other times(mainly 30 and 60 min charts) I'll use spreads cause it limits the affect of the theta but usually doesn't limit it enough for me. And like I said in shorter time frames(3, 5, 15 min charts) I'll buy naked options.

Edited January 17, 2016 by OriZ

[OriZ 3,157]

Basically this is how my trading system works:

I have about 10-12 indicators that I use in each chart depending on the chart, all automated through tradestation so I can go pee when I need to Total activity per day between buying and selling normally 20 to 40 actions but the shorter time frames(3 especially and then 5 min) are responsible for most of it. 15 min doesn't change as frequently and then of course 30 even less, 60 mins even less and then we get to the daily, weekly and monthly.

15, 30 and 60 are for trends and I stay over night. 3 and 5 are intraday only.

No point in saying what all those are showing now as they can easily change Tuesday. However as far as the longer systems here's a breakdown:

Dow: Short daily, weekly, monthly.

NYSE composite: Short daily, weekly, monthly.

NASDAQ: Short daily, weekly. NEUTRAL monthly(but close to turning short, also)

S&P500: Short daily, weekly. NEUTRAL monthly(but close to turning short, also).

After the crash in 2008 my S&P monthly system went from short to neutral at 919 on June 2009. It went long at 1,115 - Dec 2009. However because of the behavior of internals which diverged at the final bottom in March I was already out of most shorts and opened synthetic futures positions based on the weekly system which doesn't lag as much. No need for stock purchases. Weekly system went neutral 842 - last week of March 2009. Turned long at 940 - June 2009. Weekly went short again 1971 last August. I was already out of my long futures that were bought in 2009 and shorting before that as I wrote in the other thread at the time that I did which was around 2070. I based that decision more on the daily and because of all the signs of weakness we had leading to that point. Like I said monthly was long since 1,115. It went neutral in August and should change to short soon. The Dow already did, in Sep. I've only had a monthly Dow short signal 3 times in the last 25 years(I haven't been trading for that long but some of it is backtesting). In 2001, in 2008 and in 2015.

Daily, Weekly, Monthly - normally synthetic futures.

30, 60 - naked or spreads.

3, 5, 15 naked.

Haven't used more complex strategies like butterflies or condors in 6 years. Just don't see the need for them, but I see that you like them, and I do think a condor for next week is probably a good idea.

Edited January 17, 2016 by OriZ

[X Factor 1,112]

Basically this is how my trading system works:

I have about 10-12 indicators that I use in each chart depending on the chart, all automated through tradestation so I can go pee when I need to Total activity per day between buying and selling normally 20 to 40 actions but the shorter time frames(3 especially and then 5 min) are responsible for most of it. 15 min doesn't change as frequently and then of course 30 even less, 60 mins even less and then we get to the daily, weekly and monthly.

15, 30 and 60 are for trends and I stay over night. 3 and 5 are intraday only.

No point in saying what all those are showing now as they can easily change Tuesday. However as far as the longer systems here's a breakdown:

Dow: Short daily, weekly, monthly.

NYSE composite: Short daily, weekly, monthly.

NASDAQ: Short daily, weekly. NEUTRAL monthly(but close to turning short, also)

S&P500: Short daily, weekly. NEUTRAL monthly(but close to turning short, also).

After the crash in 2008 my S&P monthly system went from short to neutral at 919 on June 2009. It went long at 1,115 - Dec 2009. However because of the behavior of internals which diverged at the final bottom in March I was already out of most shorts and opened synthetic futures positions based on the weekly system which doesn't lag as much. No need for stock purchases. Weekly system went neutral 842 - last week of March 2009. Turned long at 940 - June 2009. Weekly went short again 1971 last August. I was already out of my long futures that were bought in 2009 and shorting before that as I wrote in the other thread at the time that I did which was around 2070. I based that decision more on the daily and because of all the signs of weakness we had leading to that point. Like I said monthly was long since 1,115. It went neutral in August and should change to short soon. The Dow already did, in Sep. I've only had a monthly Dow short signal 3 times in the last 25 years(I haven't been trading for that long but some of it is backtesting). In 2001, in 2008 and in 2015.

Daily, Weekly, Monthly - normally synthetic futures.

30, 60 - naked or spreads.

3, 5, 15 naked.

Haven't used more complex strategies like butterflies or condors in 6 years. Just don't see the need for them, but I see that you like them, and I do think a condor for next week is probably a good idea.

That's quite a system you have. I haven't traded as long as you have. Each year I pick up more ideas. The key to survivability is to last long enough to have a viable trading system that is back tested. Tradestation is pretty good for that.

[OriZ 3,157]

That's quite a system you have. I haven't traded as long as you have. Each year I pick up more ideas. The key to survivability is to last long enough to have a viable trading system that is back tested. Tradestation is pretty good for that.

Exactly. And I would venture to say that the key is also to take emotion out of it. If I have a set of tools - I'll follow them blindly. Sometimes they won't work, and I won't care, as long as I stuck to the plan. Most times they will work. If I didn't stick with the plan and made money or lost money I'll feel much less confident than sticking to the plan and losing money.

Once intuition is out of it, once emotion is out of it, you're already 3/4 of the way to profit.

Being I combine "longer term" trading with swing trades as well as intraday trades I could basically have many different puts and calls at the same time. But I'm mostly a Delta trader. I try to eliminate the Vega and the Theta. I pick a direction and trade it.

I have the same systems for gold, oil and the dollar and so far like I said the first two are still short and the latter is still long. But just as I have written above, that at times I'll anticipate the turn before it actually does, I think a reversal is at hand. My guess is it will come together with the near term bottom in stocks, as they seem to still be tightly correlated.