Active Dollars

I was dismayed to learn that my "good deal" grill was not in stock and there would be as much as a 2 week delay in addition to another 1-2wks for shipping. I asked them to cancel the order. There were other places that advertised "meeting or beat pricing". I called one place (that did an exceptionally good job on their website with doing videos on all of the products that they sell) ; however, they would not meet that price. But we worked out a concession that everyone was happy with.

I was out of pocket yesterday. NG wrote some interesting stuff in the comment section.

Not TA and RSI's MACD's - this stuff is 'Whipsaw City'

So what leads?
futures & ticks --> lead stocks
gasoline (& nat gas sometimes)--> lead oil
platinum & silver --> lead gold

The notion that futures/ticks lead stocks makes sense to me, but I'm not a future/tick follower. To me that is die hard trader area, and I'm not a trader in that sense. I would surmise, then, that the futures/ticks are for the broad market condition short term direction as there is much volatility in that area.

To my mind, TA (and all of its accoutrements) essentially is drawing a picture of the stocks and marking price and volume patterns. My conclusion about TA is that is by looking at charts, you can find patterns of strong/weak performers that may provide investing/trading opportunities. I don't try to give it more room than that. Because the the enormity of "patterns" etc, one can take a current event and then provide a revisionist history as to how this could have been foretold on a chart.

Nevertheless, I don't think that there is any real argument against the plain fact that a chart is the historical record of price and volume and one can say that a stock is rising/falling based on that accompanied with some conclusions about support. To me you look at charts to determine if there is strength or weakness. The track record of technicians in fortune telling is spotty! In fact, the track record of most prognosticators (technical, fundamental or otherwise) is spotty.

I'm not sure how one parses out which leads v. which follows on gold, platinum and silver. But I say that as an uninformed observer--one who has not intimate knowledge of how those markets work.

With respect to gas/nat gas leading oil--I'd have to ask on a global basis if that is really true. Gas is one derivative of oil. It would seem to me that the aggregated demand for oil derivatives (feedstocks, gasoline, heating oil etc) would be the major driver of pricing. But oil is also subject to speculation wrapped up in demand/geopolitical risks in addition to USD fluctuations. Though I understand the wish for a simple linkage, I've not seen anything that leads me to conclude that gas leads oil. Whatever the correlation (and I'm certainly not trying to argue or opine on it), the current price of oil makes no sense to me though I understand the hand wringing reasons.

NG provides a very lucid summary of the above which I'll encapsulate here so it is not relegated to the comments section in an unsearchable format:

Here's a 'nice' formula:

Leading indications + Time patterns
+ Mulitple timeframe Trends
=== Active Dollars

Not TA and RSI's MACD's - this stuff is 'Whipsaw City'

So what leads?
futures & ticks --> lead stocks
gasoline (& nat gas sometimes)--> lead oil
platinum & silver --> lead gold

Plus: each sector has it's own leading bellwethers -- don't trade against leading indicators... that's a good rule - right?

What are Time Patterns?

Beginning of month buying, end of month markup, options week, future contract expiry (I forgot about that one on that oil short trade 10 days ago- duh!), holdiday trading patterns (market after returning from a holiday reconsiders things and either reverses or after a pause continues to existing trend), year of the decade patterns - these are some daily type patterns.

For the hyperactive homegamers:
Opening 30 min's - gaps filled (or not)
10:00- 11:30 1st leg (with a pivot often around the 10 or 10:30 news/econ data)
12:1PM - fade lunch
1PM-1:30PM - important time of day - either we begin a second leg or reverse
3 - bonds close - often profit taking
3:30- 4:00 - squeeze them or buy back in depending on tomorrow's news lineup..

Moves are due to the normal flow of traders moving in and out trying to guess where other traders are positioned - not PPT manipulations...

Multiple Timeframes:
Moving Averages are NOT signals.
Let's repeat this:
Moving Averages are NOT signals.
MA's show whether support and resistance will hold or not.

If all the ducks on the short term
daily/60min/15min MA's lineup - short term trade in that direction- if not countertrade until they do.

If all the ducks on the weekly/daily/60 min line up - position trade in that direction (buying on weakness) - otherwise do nothing.

Notice how some homegamers tried to short oil this a.m - but:
(a) Gasoline was not down, Natgas was up (even gold was up) - STRIKE ONE - SHORT TERM TRADING AGAINST LEADING INDICATORS
(b) Commodity Funds like to Buy often at beginning of month - STRIKE TWO - trading agasint TIME patterns
(c) MA' - not all pointing down - STRIKE THREE

Reassessing these indications on the close may provide better entries.... as well as a solid confirmation for such a trade.

In summary:
Leading indications + Time patterns + Mulitple timeframe Trends === Active Dollars

Perhaps NG will talk about the concept of "Active Dollars". My presumption is that should their be harmony among the leading indicators, time patterns and multiple timeframe trends, then dollars should be actively in pursuit of opportunities (good risk reward); otherwise dollars should be dormant to await such setups.

IN another post, I will post Stan Weinstein's directives.

Thank you NG for sharing your thoughts with this blog.