The best play for Monday is to sell the currencies, particularly the yen and the Swiss franc, which both posted negative numbers in the signal categories. All the currencies have formed â,"capâ, tops, although the yen isnâ,"t posting one because it is occurring following a down rather than up move. All of them have just come off two consecutive up open-to-closes, a contrarian indicator also indicating a probable downmove. As youâ,"ll further notice, the either-ors are negative in both the yen and franc and neutral in the euro.
The bond complex is pretty much the opposite -- uncontradicted buys across both signal groups. The 30-year bond is neutral, which means it's not arguing with the solid buys in the 10- and 5-year notes.
Something else to keep in mind is that the Chicago Mercantile exchange is at it again -- playing with the end-of-month closing prices. The â,"officialâ, mini S&P close was 1303.25, which was more than four full points lower than the last 1307.50 tick.
Why do they do it? They have their reasons, which are related to the end-of-month closing time differences between the cash and future indices (15 minutes earlier for the cash), and also the portfolio readjustment. (Some stocks going in the indicies, some coming out.) Itâ,"s a technical trading nightmare, though, and I canâ,"t for the life of me understand why every system trader isnâ,"t hounding the exchange via phone and emails. I posted as much on the TradeStation discussion site and it was total apathy. Doesnâ,"t anyone realize that if youâ,"re talking a simple 20-day moving average, one dayâ,"s price anomaly will reverberate for the next 20 days? Use a 35-day and virtually every day in your study will be skewed.
My signals come off the â,"officialâ, close -- to do anything else would involve a revamping of TradeStation windows that would be a logistical nightmare. I have to think systems will remain close to their theoretical models and that discrepancies will tend to bounce roughly equally both ways -- windfall and unexpected loss.
But why would anyone want to settle for close? I urge everyone to bombard the Merc with complaints. Tell them this is price fixing, pure and simple. The market, not goofballs in ivory towers, should decide how prices will resolve relative to portfolio adjustments and whatever other dance the officials choose to perform.
Either-Or Biases
The first set of biases includes six biases that individually signal either long or short on a daily basis, except for the rare tie. Each bias has a +1 value for long bias, and a -1 for short. The bottom line is the sum total, which can range from -6 to 6. Positive totals are bullish; negative are bearish. For bullish signals (opposite is bearish):
- The 2-day average is below the 5-day average.
- The close is above the 40-day average.
- The highest close of the last 50 days occurs before the lowest close of the last 50 days.
- The day's trading range is smaller than the 10-day average range and the day's close is higher than the 10-day average close OR the day's range is larger than the 10-day average range and the close is lower than the 10-day average close.
- The close is above the midpoint of the average 15-day range. (The 15-day high average plus the 15-day low average divided by 2.)
- Fade the majority direction of the last three open-to-closes.
Infrequent Biases
The five infrequent biases are listed below. For bullish signals (opposite is bearish):
- Four successively higher closes were followed by yesterday's down close. Today's action was irrelevant.
- Five successively lower closes were followed by today's up close.
- CUP trade. For the last three trading days, the middle day had both the lowest low and the lowest close. In addition, the low on the middle day must also be lower than the lows from the previous three trading days before the middle day. (CAP is the reverse and bearish.)
- The highest low minus the lowest low of the last three days is less than or equal to 20% of the highest high minus the lowest low of the last three days.
- For the previous two days, the market closed lower than it opened.
Calendar Biases
The calendar biases in the indexes are listed below. For a more in-depth explanation of these, click here.
Click here for the TradeStation summaries of all 14 futures biases.
DISCLAIMER: It should not be assumed that the methods, techniques, or indicators presented in this column will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented in this column are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The author, Tiger Shark Publishing LLC, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
Art Collins is the author of Market Beaters, a collection of interviews with renowned mechanical traders. Much of Art's TigerSharkTrading.com material will be expanded upon in his upcoming book that is scheduled to be released later this year. E-mail him at artcollins@ameritech.net.
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