tag:blogger.com,1999:blog-253123551511703819.post8549491055639552223..comments2023-06-21T12:09:29.290-04:00Comments on The Night Owl Trader: Thursday lowerMichelehttp://www.blogger.com/profile/11446439300213187649noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-253123551511703819.post-50781254903724057742012-08-03T01:41:01.001-04:002012-08-03T01:41:01.001-04:00Ah, OK - this sounds like the kind of thing Rob Ha...Ah, OK - this sounds like the kind of thing Rob Hanna does on his Quantifiable Edges blog. There might be something to this. After the Olympics are over, I might try doing a cross-correlation between EEM and SPY. Maybe some day I'll try correlating everything with everything if I can find some way to automate the data download.Michelehttps://www.blogger.com/profile/11446439300213187649noreply@blogger.comtag:blogger.com,1999:blog-253123551511703819.post-75563871694532262912012-08-02T21:16:47.990-04:002012-08-02T21:16:47.990-04:00Michele-
This snippet is from my own Archives, on...Michele-<br /><br />This snippet is from my own Archives, on my hard-drive. It isn't meant to be complete, it was from the system-development period of Dr. Brett’s EEM/SPY timing model. What follows is a mix of paraphrase and direct quote-- it was for my own review, not re-publication, so take it as a general overview only.<br /><br />From Dr. Brett, summer of 2009..<br /> ..As a simple example, how traders view the shares of emerging markets speaks volumes regarding their attitude toward risk-assets in general. If bullish on emerging markets they’re probably also bullish toward a host of other assets, from commodities to emerging market debt. Such sentiment factors are likely to lead to trackable directional tendencies.<br /><br />I went back to 2006, just to take a quick trendscan look, and examined what happens when the Five-Day Change in the emerging market etf (EEM) is up by 2% (STRONG) or more, and when it is down by 2% or more (WEAK). <br /><br />Interestingly, when EEM has been STRONG on a five-day basis, the next five days in SPY have been weak, averaging a loss of -.44% (130 up, 162 down).<br /><br />When EEM has been WEAK on a five-day basis, the next five days in SPY have averaged a gain of .08% (128 up, 97 down)!<br /><br />BUT.. when we look 20 days out, following five-day strength and weakness in EEM, we see a different pattern. <br /><br />TWENTY days after a strong five-day EEM, SPY has averaged a loss of -.51% (162 up, 130 down). Basically flat, given a normal SPY five-day return of -0.44% during the study period. <br /><br />Twenty days after a WEAK five-day EEM, SPY has shown further weakness, with an average decline of -1.2% (119 up, 106 down). <br /><br />Other factors (larger market trends, behavior of other assets) also affect the relationship between EEM strength/weakness and prospective price change in SPY.<br /><br />(That sort of thing... -D.)Danielhttps://www.blogger.com/profile/07748117214432133196noreply@blogger.comtag:blogger.com,1999:blog-253123551511703819.post-88452127406983445532012-08-02T17:29:08.963-04:002012-08-02T17:29:08.963-04:00Hmm - I do remember Dr. S's frequent mentions ...Hmm - I do remember Dr. S's frequent mentions of the NH/NL, and I've mentioned that myself sometimes, but I guess I must have missed the EEM part. Now I could have sworn there was a "search" box in Trader Feed, but it doesn't seem to be there anymore, which is going to make it hard to find the references.<br /><br />I often wonder what happened to him. I hope he's doing well in his private practice.<br /><br />And thanks for the compliments - the Mighty Regression Trend Channel prevails again. While I am still near-term bearish, it just seemed like a good time to take the money and run.<br /><br />The judges gave this one a solid 9.5, with a 0.5 bonus for resisting the temptation ot fold when the trade when against us.Michelehttps://www.blogger.com/profile/11446439300213187649noreply@blogger.comtag:blogger.com,1999:blog-253123551511703819.post-6466335606979712082012-08-02T16:29:24.689-04:002012-08-02T16:29:24.689-04:00Michele- I do have some insights on this, and they...Michele- I do have some insights on this, and they are courtesy of the very Dr. B.Steenbarger you mentioned the other nite.<br /><br />He put much emphasis on use of a EEM:SPY ratio, with several nuanced applications. It is more than just a Risk On/Off type metric. I and several other readers of his blog urged him several times to complete an experimental timing model-in-progress he devised, simply using this ratio, plus 20day new highs/lows on SPX. <br /><br />I don't know whether he ever did finalize that-- but since you have his Archives Blog right there on the side-panel, the simplest of searches might yield you his last few posts on the subject...<br /><br />btw, a really prudent and savvy exit today on the ES short... before that late partial market recovery. Excellent trade mgt, to go along with a careful and astute setup analysis. The "Russian Judge" awards [ ] points out of a possible [ ]!<br /><br />(I wouldn't presume to guess what a russian-judge would award, I leave that to you or others...)<br /><br />One more day of Event Risk ahead..Danielhttps://www.blogger.com/profile/07748117214432133196noreply@blogger.comtag:blogger.com,1999:blog-253123551511703819.post-69306376008760549192012-08-02T13:23:53.151-04:002012-08-02T13:23:53.151-04:00Yes, well Mario took the air right out of *that* b...Yes, well Mario took the air right out of *that* bubble, eh? The chatter, at least what I was reading, turned out to be correct. Technically, of course the market was still going lower. My only concern was that if the ECB had suddenly announced that all the Europeans had unanimously agreed to resolve their problems, then we could have gone higher. But they didn't and we didn't.<br /><br />You are wise to tread lightly in this market - this summer is proving to be very tricky.<br /><br />I'l take your word on EEM. This is a whole area I don't even look at because I don't understand it. I have enough trouble figuring out which way ES is going. If you have insights on this, I'd love to hear them.Michelehttps://www.blogger.com/profile/11446439300213187649noreply@blogger.comtag:blogger.com,1999:blog-253123551511703819.post-1897921033082237972012-08-02T02:36:57.643-04:002012-08-02T02:36:57.643-04:00thx, again, for continuing these postings thru the...thx, again, for continuing these postings thru the Olympics!<br /><br />"..uncertainty over whatever the heck the ECB is planning on saying Thursday..."<br /><br />Seems like the markets have priced in a .25% rate cut, per some Forex survey I ran across earlier this evening. More than that would be a surprise. The variable area is whether and how much they continue their bond buying program.<br /><br />It is also always possible that all of this focus on a single specific announcement is just camoflage for big players to buy or sell shares they had intentions for anyway. The over-leverage problems are systemic, and will be worked out over months and years, NOT by big announcements... <br /><br />I'm personally keeping positions lite because to me this is now more guesswork than TA. I like simple sine wave patterns, or clear crossovers, or obvious breakouts. This engaging in second derivatives of guesswork is not my cup of tea.<br /><br />One thing has caught my eye tho-- and that is the trailing 5day RS outperformance of emerging markets over the US. Had one put equal amounts into EEM and SPY five sessions ago, the happier human would be the EEM investor.Danielhttps://www.blogger.com/profile/07748117214432133196noreply@blogger.com