An Expiring T is Not Necessarily a Short Sell Signal

I have been somewhat successful selectively selling short at an expiring T.  However, this is not a short sell signal.  Many other factors should be considered before initiating a short position.  Just to review things for a moment, I see all my T's have expired as of today.  Also, markets have had a tendency to top out after the job report announcements.  The concluding factor to my decision to sell short is the fact that the S&P 500 has been up for six (6) days in a row.  Just count the green candles on a daily candlestick chart.  Stock markets are not like a roulette wheel because stock markets are not a random walk.  I opened my short position in the late afternoon with the following trades:
Bot BGZ @ 15.30
Sld Sht BGU @ 55.93
Bot SDS @ 32.85
Sld Sht SSO @ 39.89

An Overwhelming Body of Evidence

These charts constitute an overwhelming body of evidence that a new centerpost was confirmed about 10:00 AM this morning 1/19/2010.  We can either lead, follow or get out of the way because this market is going higher.  I executed the following orders this morning:

Bot DIA @ 106.58
Bot BGU @ 56.63
Sold Short BGZ @ 15.75

It takes a long time to upload my charts so I am ordering a faster Internet service.  DC


I am placing Stop Loss orders at the following levels:

Sell Stop DIA @ 105.40
Sell Stop BGU @ 54.90
Buy Stop BGZ @ 16.35

Closing out all long positions DIA T is expiring

All of these charts are the DIA 10 minute for today 1/12/2010.  They all show the latest T expiring.  I have closed out my positions at the following prices:

Sold DIA @ 105.89  + $0.39

Sold BGU @ 55.29  - $0.37

Bought BGZ @ 16.18  -$0.08

January Outlook is Bullish

I have returned from a wonderful holiday and found that my data was unavailable so I had to update my prices by hand.  You really have to appreciate the immense value of cut and paste.  The top chart is my basic volume oscillator which is based on my substitute for the up-down volume ratio.   A close look at this oscillator shows a cash build up beginning 12/21/09 and ending on 12/31/09.

The adjacent chart is an oscillator based on the last price for every 10 minute period.  The calculation of this oscillator is the same as the calculation of the basic volume oscillator, however, the closing price is substituted for the net volume figure.  This is a better illustration of the cash build up since 12/21.

The third chart is a more familiar oscillator that is the most sensitive to change of direction.  Here again we see the cash build up beginning on 12/21 and this T continues well into January of 2010.  Furthermore, this chart demonstrates the expiring T in late December with the market dropping to make a low for the formation of a new center post for this new T.

This fourth chart Illustrates a double T formation in the current T.  This portends something happening this Friday when the job data is announced. Needless to say, the market is a strong buy at this time.  I went long the market on the close 1/5/10.

The last two charts are direction indicators the first is more sensitive than the second or last chart.  The first indicator just went positive and the slower indicator is approaching the positive territory.  These are both very bullish indicators.

On the close of trading 1/5/10, I executed the following orders:

Bought DIA  @ 105.50

Bought BGU  @ 55.66

Sold Short BGZ  @ 16.10

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 12-3-09 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.

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.

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.

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.

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 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.

DIA 10 min close October 29, 2009 with Derivitive Oscillators

This definitely looks like a new center-post for a new T. What are the odds of this failing i.e. the trend not persisting to the end of the T? If this T fails the market should be shorted.

DIA 10 min close October 28, 2009 with Derivitive Oscillators

The horizontal lines are drawn at the standard deviation of the green oscillator. Both oscillators indicate we are in a cash build-up period. Any T we attempt to draw here will most likely be a failed T. If you recall from the Daily T I drew of the Dow Jones Industrial Averages, the daily averages are in an expired T zone that is normally a bear move. As we move into the longer term market correction, the average rally will increase in magnitude. A 300 point one (1) day rally in the DOW would confirm the correction. In a bull market you will almost never see a 300 point one day up move in the DOW. However, bear markets always produce high magnitude daily rallies. This is why the laws of probability keep the suckers coming back. Jessee Livermore said that you always liquidate a large block of stock in a downtrend.

DIA 10 min close October 28, 2009 special oscillator

The Horizontal lines of this chart are drawn at the standard deviation of this special oscillator. This oscillator has a very high probability of identifying short term bottoms or buy points when it turns around one (1) standard deviation. As you can see this oscillator is not forming any buy signal. Does this mean we should stay short? Time will tell.