An accident of History

Thomas  Jefferson said in 1802:
'I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks   (FEDERAL RESERVE ESTABLISHED Today in 1913) to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered...'

Was Jefferson's attitude toward bankers the result of his continual indebtedness or did he foresee this latest financial crisis.  Every bear market is accompanied by the collapse of some major financial institution.
DC

Thank you Santa

This is the Santa Clause rally and there are two (2) possible T's that are working. the Smaller T has expired and the larger T looks to last a little longer.

 The T in the above chart has expired and I am closing out my long position at the close.  In the above chart there is no indication of any other T that would influence this trade.

After closing out my long position I will look for a possible short, however, a new center post could develop very quickly so be on the lookout.  The current T may have started at the last high point on the oscillator back on December 9, 2009.  If this is the case then the T has further to go and the Santa Clause rally can break into new high territory.  If so, buy the breakout! I closed out my positions at the following prices at today's close:

Bought BGZ @17.03 + .80

Sold BGU @ 52.98  + 2.32

There is a new Center Post

There is a new center post formed in the above chart of the 10 minute DIA.  The left side of the T begins as the old T ended.

 

The double bottom in the above oscillators confirms the center post formation right at the support level.

 

The higher lo on the oscillator that occurs at a lower lo of the price further confirms the new center post of a T.  I executed the following trades:
Bought BGU @ 50.68
Sold Short BGZ @ 17.83

DIA 10 min 12-17-09 - A New T is Formed

The chart above is the DIA 10 minute from Thursday December 17, 2009 at 2:10 PM.  The chart indicates the formation of a new T and this led to my decision to close out my short positions on the close of the market.  I will take a new bullish position after the opening on T ripple Witching Friday 12/18/09.  The positions were closed out at the close on Thursday 12/17/09 at the following prices:

Bought BGU @ 50.17 + 0.72

Sold BGZ @ 17.96  + 0.09

Bought DDM @ 43.04  + 0.70

Sold DXD @ 30.10  + 0.41

I have not updated this blog recently due to illness.  I am now in catch-up mode. 

The chart of the DIA above shows a possibility of a longer timed T that is just beginning.  This could carry the bullish trend of the market well into January of next year.  I will publish the daily T charts for the Dow Jones industrial averages later in the day on Friday and report any prices if I take a position at the opening.

DIA 10 min 12-10-09 - A New T Was Formed and Then Expired

A new T formed after I had initiated a short position in the large cap ETF's.  I had a nice profit in my positions in BGU and BGZ and did not take the profit when I could.  I still have a profit, just not as much as I did yesterday.  If I were paying closer attention I should have noticed the new T forming and then taken my profits but life is not always that easy.  Since we have another expiring T I added to my market short position in the following positions:
Sold Short DDM @ 43.74
Bought DXD @ 29.69

Daily Close S&P 500 12-7-09 Trend Indicator Oscillator

Here is the same trend indicator oscillator applied to the daily prices of the S&P 500.  As you can see I am acting on a sell signal from the Daily chart as well as a sell signal from the 10 minute intra day chart.

Trend Indicator Oscillators

The above chart shows my trend indicator oscillators that are based on a surrogate net volume advance/decline number for every 10 minute interval of the DIA.  When the green line crosses above the red line, a bull trend begins and when the red line crosses above the green line a bearish trend begins.  Each oscillator is a derivative of my basic oscillator.  This trend indicator is more sensitive than the oscillator shown in the chart below.  The trend indicator oscillator shown below is the exact same calculation as the above chart oscillators with the 10 minute last price of the DIA substituted for a net up/down volume substitute.

The above trend indicator signals a new trend as the red line crosses the red line.  As the green line crosses above the red line a bull trend begins and visa-versa.

A Small Expired T indicates a Short Sale of the Market Averages

This is definately an expiring T which portends a weaker market this afternoon and tomorrow.

This function indicates a short term change in the direction of the market to down.  I executed the following orders:

Sold Short BGU @ 50.89

Bought BGZ @ 17.87

 You can enlarge any chart by double clicking on the chart.

DIA 10 min 12-4-09 Oscillator signal to cover

The above chart shows the oscillator just crossed above its moving average line indicating the end of the move.  I closed out my positions at the followinf prices.
Bought to cover BGU @ 50.11  plus .70
Sold BGZ @ 18.11   plus  .40

A Modest Proposal

Last Friday my good friend took me to a Scottish restaurant for dinner.  The idea of a Scottish restaurant may seem like an oxymoron to most readers yet it is not a far-fetched concept if you live in the town where Jack Nicholas built his home golf club “Muirfield Village Golf Club.”  All the streets circumventing the Golf Club are named after the streets in St. Andrews Scotland where the “Royal and Ancient Golf Club” is located.  Here it is perfectly logical to find the appellation Scottish associated with a restaurant in keeping with the theme of the community.  I ordered fish and chips for dinner with a glass of Killians.

My friend is a hale and hearty fellow well met and always the perfect host in social settings yet intensely laconic in business matters.  Our conversations are always eclectic and cover every subject imaginable.  As long as I have known my friend, he has neither expressed nor denoted any specific political philosophy that would indicate either a liberal or a conservative predisposition.  If I were to identify the underlying principal that governs his worldview, it is pure reason. 

Because my friend is a very successful businessman, he caught my attention when he said that he had a solution that would immediately reduce unemployment to virtually zero.  Since President Obama called for a “Job Summit” I am publishing this innovative solution to expose it to the Socratic method and peer review.  Your comments are encouraged.

THE SOLUTION:
If it is mandated that the hours worked by every American be reduced by approximately 10% or one hour per day without any reduction in weekly pay then all employers will have to hire 10% more people.  Since labor makes up about 20% of costs, there would be only a 2% increase in the cost of production and a one time 2% increase in the inflation rate.  We can compensate for imported goods by increasing customs duty by 2%, a small price to pay for entering our markets.  The extra leisure time would allow workers more time to spend their meager earnings thus stimulating many sectors of the economy.  With the extra time many workers would start a part time home based business thereby creating more wealth for this nation.

I submit this modest proposal for your comments.

Sold Short The Market at 2:10

Bought BGZ @ 17.71
Sold Short BGU @ 51.41

DIA 10 min 12-3-09 Expiring T's

The above chart of the 10 minute Diamonds illustrates the last three T's.  The symmetry of the T's demonstrates how the market average always goes higher after a certain cash build up period.  The amount of time that the market averages advance in price is approximately equal to the amount of time of the cash build up.  The oscillator function that is graphed below the DIA prices is derived from exponential moving averages pf price differences during the 10 minute periods.  The latest blue T on the left of the chart is due to expire at 3:50 PM this afternoon December 3, 2009.  I always begin the left side of the T at the high point of the oscillator that marks the beginning of the cash build up phase.  You will notice the invariable sell off after each T expires, however, the ideal is to identify the middle post of the T and go long the market.

 

This 10 minute chart of the Diamonds shows a higher frequency function of the previous function curve.  The blue T from the higher chart is drawn here along with a smaller T that is set to expire at 2:10 PM this afternoon.  Note that after each expiration of a T there is a drop in the market average.  Sometime between 2:10 and 3:50 I will short the market and report to this blog.

That that is, is and that that is not, is not. Was this a T?

Was this a T or a bearish T? That is the question.  This market is having a hard time digesting the news from the Middle East and the financial crisis in Dubai.  The most troubling aspect of this news is the efforts of the governments involved to censure the news.  Nothing good will come of this.  "By the pricking of my thumbs, something wicked this way comes."
By all aspects, all T's have expired and I am looking for a level to short the market.  I will look for a signal from the trend indicator chart below.  The oscillator turns positive in an up move and it turns negative in a down move.  The horizontal lines are drawn at one (1) standard deviation of the oscillator.  If the indicator moves above one (1) standard deviation, I will look to short the market.

The price of the DIA is trading right on support.  It seems to me that if this support is broken the price is in for a fall.  If this reaction does occur, the next center post will be easily identified and we will be prepared for the next bull move.

Covered all My Positions

Sold BGZ @ 18.95    +$0.98
Bot  BGU @ 48.27    +$9.63
Sold DXD @ 30.55   +$0.51
Bot  DDM @ 42.65   +$0.75
Bot  DIA @  102.90  -$0.27

Is it Time to Cover my Short Positions?

 The two charts above illustrate the difference between a basic oscillator and a derivative function that that smooths the vicissitudes of the basic oscillator.  The derivative oscillator also illustrates a persistence in a trend once the trend changes.

In my previous posts I have noted whenever I put on a position.  My current positions reflect a net short position in the market averages with the following derivative ETF's:

Long BGZ @ 17.97

Short BGU @ 57.9

Long DXD @ 30.04

Short DDM @ 43.40

Short DIA @ 102.63

The question is where and when do I cover and take my profits?  The top chart with a derivative function looks like it may be changing direction, however, it remains in negative territory.  Today is Option Expiration Friday so anything can happen this afternoon.  I have decided to close out my positions and will report my prices in my next post.  It is 1:13 PM 11/20/09.

Time to Short The DIAMONDS

I am shorting the Diamonds by Buying DXD @30.04 and simultaneously Shorting the same amount of DDM @ 43.40. 

Correction: T Expires at 1:10 PM today!!

I previously stated that the latest T ended at 3:10 PM today.  This is incorrect because I misread the time.  The correct time of expiration is 13:10 or 1:10 PM EST.

For Dino

 

My friend Dino complained that there is too much technical jargon on this blog so I posted a picture of my fishing buddy just for Dino.

New T expires today at 3:10 PM

The top chart is a pastiche of several graphed functions that help to define the T's.  The smaller T in the top chart began at 12:20 PM on 11/9/09 with the center post set at 9:30 AM on 11/13/09.  This smaller T explains the last rally at the end of the much longer T.  This smaller T is set to expire this afternoon at 3:10 PM.  There is no other structure evident in these 10 minute charts nor is there any supporting structure in the daily charts. T theory suggests that when prices are outside the right side of the magic T the market performance is considerably lower than when inside the time frame of the right side of the T.

The lower chart shows two opposite functions that indicate either an uptrend or a downtrend as they cross.  These derivative functions are further evidence of symmetry in the time series analysis of market averages.

Going Short the Market

Above is a 10 min chart of the DIA with a short term direction indicator function that goes negative when the market turns down and positive when the market turns up.  The only thing you have to guess is the duration and persistence of the trend.  Because of the expired T and the obvious manipulation of the Dow Jones Transportation Averages at the close yesterday to make them look bullish, I have gone short of the market.  I shorted BGU at 57.9 and bought BGZ at 17.97.  These are both triple alpha ETF's and are derivatives.  There is an unknown premium and discount in the prices of these derivative ETF's that I hope to overcome by a long and short position that is essentially a net short position.  We shall see how this works out.  I hope you all understand that derivatives are a zero sum game and for every winner in these stocks, there is a loser of exactly the same amount of money.

Transportation Average Closes at a New High

Dow theory says that stock prices can be manipulated in the short term, but the Dow Transportation Average eked out a new high closing price today at 4046.50, so I closed out my positions in the aftermarket.
Sold BGZ @17.85 and covered the BGU @ 58.17.

New Positions

I went long BGZ @ 17.82 and I went Short of BGU @ 58.35

My latest longer term T expired today at 15:00 according to my spreadsheet.

Dow Theory Revisited

The Dow Theory is the first and foremost expounder of the term Divergence.  The two daily graphs immediately above show the daily closing prices of the Dow Jones Industrial and Dow Jones Transportation averages courtesy of StockCharts.com.  Notice that the Transportation average made a lower low and has yet to make a new high.  Note well that in the above chart of the Dow Jones Industrial average the price has continued to make higher highs and higher lows.  Price is the most bullish indicator of the $INDU.  If the $TRAN does not make a new closing high  above 4045.11, the Dow bull market will be put on hold because of the divergence of the trends of the Transportation and the Industrial averages.  The Transportation average must close above 4045.11 to maintain its technical up-trend.  If the Transportation average closes above 4045.11 then cover your shorts and take your losses because we are going higher.  It has been my experience in the past, NOT to trust a rally on declining volume. This is most noticeable in the above charts.  At a critical juncture like this, Goldman can make the Transportation Averages do whatever they want.  Thus we cast our fates to the wind.

DIA 10 min 11-16-09 a Pastiche of Functions

Did we just form a new T?  Does this chart give us a clue as to Mr. Bernake's speech this afternoon.

This could be a new smaller T that is due to expire tomorrow afternoon or it could be a Bear T that could be an indicator for the next center post.  If it is a new T it supports George Rahal's bullish opinion.  Curiouser and curiouser.

DIA 10 min 11-13-09 Longer Term Look at T's and Backtesting an Oscillator

If this market is a fractal then where is the strange attractor?  If we can find the center post of a T in the daily charts using an oscillator then we should be able to discover the same center post after a cash build-up in a chart of smaller time dimension i.e. a ten minute price chart.  In the above 10 minute chart of the Diamonds,  I have back tested an oscillator with the help of an idea I stole from George Rahal.  With attribution to George, in drawing the begining of the middle T, I disregarded the high price of 9/23/09 and began the left side of the middle T on 9/16/09.  I have shown this oscillator in previous charts I have published where this function was drawn in conjunction with another oscillator, however, it is when we isolate this function that we see the predictive ability of this oscillator in determining the cash build-up phase of the T Theory.

The current T will expire this Monday, November 16, 2009 in the afternoon.  In light of the fact that in the longer term time dimension of the daily charts, the most recent T has expired, leaving us in a limbo of indeterminacy where we cannot find the daily direction of a headwind for this market.  I have found it best to trade in the direction of the daily trend while utilizing intra day charts for trade signals.

I put out my first short position in DIA yesterday 11/12/09 at 102.63.  I plan to add to this position between now and Monday afternoon.

Time to short the Diamonds

 

In the above charts the blue line is the 10 minute last  price of the DIA.  The top chart shows a trend indicator that goes positive when the trend changes to up and negative when the trend changes to down.  The lower chart depicts two oscillator that cross when the trend changes.  The long term daily T has expired and there is a short term T that expires on Monday November 16, 2009 at 1:40 PM..  I hesitate to get in too early, but I put on part of a position at 12:25 at 102.63 with a close stop.

Terry Laundry Revisited

Terry Laundry has recently explained his concept of Bear T's or Failed T's and more recently Phantom T's.  When a Bear T is discovered, it can be used  as a tool to discover the next center post.  In the above chart, the blue line is the 10 minute last price of the DIA and below it is a derivative oscillator based on the last price.  In the chart, utilizing the price and the oscillator I drew the smallest T and since it failed, the end of the T gave us the center post for the second T.  The second T also failed and I used the end of the second Failed T to mark the center post of the current green T.  This latest green T has proven to be an exceptional Bull T.  If I have interpreted T Theory correctly with this oscillator, The current T will expire at 1:40 PM on Monday
November 16 , 2009.

DIA 10 min close November 11, 2009 with Derivitive Oscillator

DIA 10 min 11-9-09 Advance-Decline Magic T

The above chart is a 10 minute intra day proxy for a typical advance decline summation daily chart.  The 10 minute data is simply added to the previous day total and the above chart compares the price and a-d index.  The T that is featured will expire on Tuesday November 10, 2009 at 11:40 AM.

An Incorrect Placement of the Center Post Leads to trading error.

 

In the top chart of the Basic Volume Indicator, the red line shows the incorrect placement of the Center Post of the green T in the middle chart.  The incorrect T was placed at 14:20 on November 2, 2009.  The next green line in the upper chart of the Basic Volume Indicator shows the correct placement of the Center Post at 11:30 yesterday morning, November 3, 2009.  This latest T began at 10:10 on Monday November 2, 2009 and ended this afternoon at 13:00 November 4, 2009. 

When I constructed the green T, I did not place the center post at 14:20 on November 2, 2009.  I made a mistake in the placement and therefore the entire green T is hogwash.  The oversold reading  of the basic volume oscillator gives us a good reading on the last center post, however, the oversold reading of the basic oscillator tends to be too early.  The Center T Oscillator broke down here and was of no help.  I drew a downtrend line over the cash build up phase in order to accurately determine the center post.  Since this last T is expired and we are definitely in a chah build up period and the Daily longer term T has expired, I shorted BGU at 48.83 on the close and bought BGZ at 21.51 on the close. 

I have to think seriously about the jobs report due out on Friday and will not hold any position into the report.  I have had some trouble uploading my charts, otherwise I would have publishes my blog before the Federal Reserve announcement. I think I have solved my problem and hope to be more timely with my postings.

It is very ominous how this market cannot hold on to a rally.  Whenever there is a merger or a buyout like yesterday the market usually soars because the supply of stock has been reduced and there is an injection of cash into the capital markets which naturally drives the price of stocks higher.  Yesterdays market did not act well in the light of the buy out of BNI by Berkshire and the merger of Stanley and Black and Decker.  That is a lot of stock taken out of this market and no significant rally in stock prices to reflect the fundamentals.  I wonder what the jobs report will reflect on Friday AM. 

Stopped OUT

I was stopped out on the opening this AM.  BGU short covered at 49.82 and the BGZ long was sold at 21.12

DIA 10 min close November 3, 2009

The chart immediately above is a Center Post Indicator.  This function shows the center post for this T is 14:20 yesterday on November 2, 2009.  This T has just expired.  The middle chart above is the T that just expired.  The chart at the top is a trend indicator that has just moved into the negative as the T has expired.
At 11:11 this morning I initiated a short of BGU at 47.81 and I went long of BGZ at 22.03. 
I am now going out to vote as I hope all of you will do today.

The Daily T has expired so in the longer term we are in a time of market under-performance.  I intend to take advantage of this market weakness and short the rallies.  I will look for center posts in the 10 minute charts in order to find entry prices for shorting the market.  The lower chart is a directional chart of the oscillator which marks a change in trend as it moves from positive to negative.  As you can see at the close on Friday the oscillator was indicating a market rally was beginning.  I will post the prices that I will enter the market later in the session.

DJIA Daily Close with Special Oscillators 10-30-09

This is an updated chart of the Daily Dow Jones Averages with Terry Laundry's Magic T's drawn by using my new study unit.  This T expired on October 21, 2009.  The oscillator shows that we are in a cash build up period and the next bull move will be of fairly long duration.  A new problem has been revealed causing the market to fall and of course it is always with the banks.  Now that we are all schooled in Credit Default Swaps and the Z Tranche of a CMO we are now going to learn all about Deferred Tax Assets.  If City Corp. has to write off  $10 Billion in Deferred Tax Assets, that will reduce their ability to loan to businesses by $100Billion.  That means that they will have to rely on borrowing money from the Fed. (at .25%) to fund their security trading desk in order to keep earning money.  Who can guess which bank is next to have a Deferred Tax Asset Problem?

DIA 10 min close October 30, 2009 with Derivitive Oscillators

Is it time to draw a center-post?  How oversold is this market?  The Trend Oscillator below the T chart shows no indication of a trend reversal at this time.  If anyone initiated a short position into yesterday's rally, the trend oscillators indicate you should hold the short for now.  We cannot draw a new center-post until the cash buildup phase is completed.

DIA 10 min close October 29, 2009

"Danger Will Robinson..."  This chart shows an analog MACD that signals an uptrend or downtrend.  The oscillator is signaling a change in trend when ever they cross.  This may be a time to get short.