The Forecasting Systems Letter
Jeffrey Mishlove
| Vol. 3, # 5 |
Tuesday, September 12, 2006
|
History of Hourly Market Outlook, plus
Sector Rotation, from Dynamic Trend Profile
The people at Dynamic Trend
Profile have
instituted a new feature in their market forecasting platform. Now, it
is possible to view the forecast graphics for the overall market as
something of a time series. The diagram below shows hour by hour for
the past four days or so.
Of course, it is not possible for
me to go into all of the details regarding the meanings embedded in the
colored shapes above. But, let me cover the basics. Blue is bullish.
Red is bearish. Each profile, shows eleven "rooms." (The "rooms"
actually represent time windows.) The four "rooms" on the right are of
short term interest for day traders. The four "rooms" in the middle are
for "swing traders" and range from one-day up to two weeks. The three
"rooms" on the left are for position traders, and range from two weeks
to ten months.
One thing is clear. The proprietary algorithms developed by Tom Joseph for Dynamic Trend Profile have been consistently optimistic regarding swing-trading (beyond the first swing trading "room") and position trading. Yet the day-trading signals have been predominently either neutral (white) or bearish.
Ironically, if one looks at the overall market, sector by sector, Dynamic Trend Profile seems much more berarish, as shown below:
One thing is clear. The proprietary algorithms developed by Tom Joseph for Dynamic Trend Profile have been consistently optimistic regarding swing-trading (beyond the first swing trading "room") and position trading. Yet the day-trading signals have been predominently either neutral (white) or bearish.
Ironically, if one looks at the overall market, sector by sector, Dynamic Trend Profile seems much more berarish, as shown below:
The Risk of Deflation Highlighted by Richard Russell
Today,
we saw a significant decline in oil and in precious metals. Gold mining
stocks were particularly hard hit. Market news analysis suggests that
this is largely the result of easing fears concerning confrontation
with Iran. Richard
Russell,
however, sees other ominous signs of deflation. He writes:
Over the next few years over $2 trillion in adjustable-rate mortgages are due to be reset, and reset at substantially higher prices. Meanwhile, tens of thousands of new homes are still coming onto the market, and inventories of unsold homes and condos are rising to record highs almost everywhere....But there's another factor about debt. Massive debt in itself is deflationary. Massive debt acts like a sponge in that it sops up cash, since it's cash that services debt. To offset this deflationary feature, it is necessary for a government to inflate. If a government does not inflate enough, then the pressure of debt exerts a deflationary force.
Russell notes that in a deflationary environment, cash will be king. And he suggests that his subscribers may wish to assume greater positions in T-Bills and other highly liquid instruments. As a warning sign of coming deflation he shows that the CRB Commodities Index has recently broken through an important line of rising support that has held for the last two years.
While the chart above looks very ominous, the actual data from today is even worse. The index currently sits at 313.73 -- so it has broken below the lows set last Feb-Mar, and May. As someone holding gold and silver, plus mining company stocks -- I am concerned about the possibility of further price collapses.
Over the next few years over $2 trillion in adjustable-rate mortgages are due to be reset, and reset at substantially higher prices. Meanwhile, tens of thousands of new homes are still coming onto the market, and inventories of unsold homes and condos are rising to record highs almost everywhere....But there's another factor about debt. Massive debt in itself is deflationary. Massive debt acts like a sponge in that it sops up cash, since it's cash that services debt. To offset this deflationary feature, it is necessary for a government to inflate. If a government does not inflate enough, then the pressure of debt exerts a deflationary force.
Russell notes that in a deflationary environment, cash will be king. And he suggests that his subscribers may wish to assume greater positions in T-Bills and other highly liquid instruments. As a warning sign of coming deflation he shows that the CRB Commodities Index has recently broken through an important line of rising support that has held for the last two years.
While the chart above looks very ominous, the actual data from today is even worse. The index currently sits at 313.73 -- so it has broken below the lows set last Feb-Mar, and May. As someone holding gold and silver, plus mining company stocks -- I am concerned about the possibility of further price collapses.
www.eMiniZ.com,
Rocket Science for e-Mini Index Traders
These are
excellent statistics. The green graph, above, shows equity gain over
the past year. But, allow me to add two cautionary notes: First,
trading results in 2005 were rather flat and not at all so spectacular
as shown above. Second, the system has been relatively flat for the
past three months. Total equity is currently below the June peak.
Most traders are familiar with the
name, John Ehlers, a respected developer of trading systems using
unique, proprietary algorithms based on approaches that resemble the
forecasting of trajectories used in rocket science. Ehler's website
provides daily
trading signals on five different e-mini contracts. You can even sign
up for a 30-day free trial. The results of trading all five contracts
over the past year are shown below.
These are
excellent statistics. The green graph, above, shows equity gain over
the past year. But, allow me to add two cautionary notes: First,
trading results in 2005 were rather flat and not at all so spectacular
as shown above. Second, the system has been relatively flat for the
past three months. Total equity is currently below the June peak.
BioComp
Dakota Forecasts the Nasdaq e-mini Contract
In a
previous letter, I have touted the unique features of the new
forecasting system, called Dakota, developed by Carl Cook's
BioComp Systems
This is the one system of which I am aware that is constantly adapting to market conditions, bar by bar (although my impression is that John Ehlers makes a similar claim for his eMiniZ signals). The signal from today is bullish, and is in agreement with the eMiniZ signal, also. Note that, during the past year, one would have gained $8398 from trading a single e-mini NQ contract. This is virtually the same amount that was attained by the eMiniZ system trading the same contract during this period.
This is the one system of which I am aware that is constantly adapting to market conditions, bar by bar (although my impression is that John Ehlers makes a similar claim for his eMiniZ signals). The signal from today is bullish, and is in agreement with the eMiniZ signal, also. Note that, during the past year, one would have gained $8398 from trading a single e-mini NQ contract. This is virtually the same amount that was attained by the eMiniZ system trading the same contract during this period.
Most
Profitable Input Variables, According to Profit Data Miner
Profit Data Miner is a unique,
number crunching system developed by BioComp Profit user James
Slack-Smith of Australia. (His former website, www.trendindicators.com,
is no longer up -- but cached pages are still available on Google.) I
bought a copy of this software from James and spent a period of about
four months solid, 24 hours a day, sifting through about ten thousand
potential input variables (for BioComp
Profit's neural "mesh" system). The results of the top 32 inputs
are shown below, based on total equity gained from December 15, 2003,
to December 15, 2005. The particular mathematical formulas shown will
be recognizable to BioComp Profit users.
It's interesting to note that one
utility stock, AES, shows up in six of the top nine slots. In each
case, the input variable is based on a moving average crossover system,
using exponential moving averages. My preliminary tests show that these
inputs have continued to work well during the ten months subsequent to
the original number-crunching period. And that, of course, is the key.
Those readers acquainted with the workings of neural networks may very
well appreciate that this is, very likely, a hot tip.
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