This is great
It was filmed a year ago but still awesome
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Expert technical analysis of financial markets by JC Parets
by JC
by JC
Earlier today I walked into a buddy’s office to catch him looking at an hourly candlestick chart. I told him this nonsense needs to stop immediately.
My friend Brian Shannon over at alphatrends.net takes this stuff personally. And I love that about him. He wrote an awesome post on this very subject a couple years ago. Check it out:
“Look at the picture below and ask yourself ‘which one doesn’t belong?’ It is not a trick question… the lone apple is clearly different than the 6 oranges in the picture.”
“Multiple timeframe analysis allows us to better visualize and put into context the conflicting messages the market may be broadcasting. Let’s say you started your analysis on a daily timeframe and you wanted to take a deeper look at the market action, many people will look at an “hourly chart” or one where each data point (candle or bar) is equal to 60 minutes of trading. In my opinion this timeframe is a flawed timeframe to look at, especially if you add any indicators or oscillators to your analysis.
Here is why the 60 minute timeframe is flawed. Each day the equities markets are open from 9:30AM to 4:00PM Est. From the opening bell to the closing bell, the market is open for 390 minutes each day. If we are to divide a 60 minutes into 390 minutes you would get 6.5 periods. In other words, you would not have an equal amount of data in each bar or candle.
Another way to think about it is to recognize that the bars on an hourly chart are completed at the end of each hour, so the 9:30-10 timeframe would build one full candle on a sixty minute chart even though it only has 30 minutes of data… On a chart with 60 minute candles there would be seven candles for each day: six of them would be constructed with 60 minutes of data and one would be constructed with just 30 minutes. We would be comparing apples and oranges.
You may be thinking that it is not a big deal, but once you start adding basic technical tools, such as a moving average, you will recognize that the 30 minute timeframe having equal weight in the calculation of the average as the six- 60 minute periods doesn’t make sense. As we know, technical analysis is more art than science, but little subtleties like keeping our data consistent can make a difference. If we want a true “average” weight of a bunch of oranges, we cannot accurately determine it by averaging six oranges and one apple.
So here is the simple solution. Either switch your chart to a 65 minute timeframe so you have six candles of equal length each day (390/65 = 6.0) or further reduce your timeframe down to 30 minutes of data. With 30 minute data periods each day will have 13 individual candles of equal length.”
Thanks Brian!
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by JC
I think it’s important to take a quick look at this chart every now and then.
A short-seller’s worst nightmare:
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Treasury Yields Quick Update (dshort)
Tags: $SPY $TNX
by JC
It feels like just a month ago that everyone had forgotten about what is possibly the strongest asset on earth. Tough to name many things that are sitting at or near their all-time highs. We put out a note at the end of July about how the yellow metal loses its sex appeal when it doesn’t do anything for a while. And that’s precisely the time that we should pay a little bit more attention.
At the time, the risk/reward was right up our alley. We said that if we started to break below 150 on the $GLD that we would get much more cautious. But that as long as it held, it seemed like a good entry point. Well, over the last couple of weeks, precious metals have been on a tear and $GLD has now broken above it’s downtrend line from last year’s nominal all-time highs.
This isn’t really complicated analysis. You guys that know me and read the blog know that I’m a pretty keep it simple stupid kind of guy. And that seems to work best for me. This is your basic support/resistance and trendline analysis. But when we add some momentum into the picture, our Relative Strength Index confirms the price action. RSI in the $GLD weekly chart has maintained its bullish mode and held onto the key 40 support level throughout the summer.
Gold looks solid here guys. I think 180 is in the cards and potentially much more after that. But let’s cross that bridge when we get to it.
Tags: $GLD $GC_F $NUGT $UGL $DGP $QO_F
by JC
I know everyone hates to hear this but we are all participants in a market of stocks, and not just a stock market. It’s cliché I know, but get over it. We always say Dow this, S&P that, Nasdaq, Russell blah blah. But each of these major averages are made up of a basket of stocks, whether they’re 30, or 100, or 500 or 2000 names. So when the averages are making new highs, we want to see the number of individual stocks making new highs increasing as well. When this number is declining in an up market, we know there is underlying weakness in the marketplace.
One thing that has me worried these days is the declining number of Net New Highs as S&Ps and other averages have continued higher. Stockcharts.com has a great tool with the ticker symbol $USHL that takes the number of New Highs in the NYSE plus the number of New Highs in the Nasdaq and then subtracts the new lows in both giving us the total of Net New Highs – Lows.
Look back at what was happening this Spring as the stock market was making new highs but the number of Net New Highs was deteriorating. Boom 10+% correction. Unfortunately we’ve seen similar action throughout this summer rally.
I know I’ve been pretty bearish short-term over the last couple of weeks, so this is something we’re watching that could change our minds.
Tags: $SPX $QQQ $DJIA $SPY $IWM
by JC
I was fortunate enough to spend a few days in Boston last week. My buddy Joe Fahmy and I went to the Miami/Boston College football game and had a blast. But what I did on Friday afternoon really took my breath away. Fidelity has this ginormous chart room that is absolutely extraordinary. I shared a few of the pictures on Instagram the other day, but here are all of them in full.
How cool is this???
Magazine Cover Indicator:
The biggest chart I’ve ever seen (The 1970s alone is bigger than my desk):
by JC
Time to rock and roll.
US Equity markets are struggling to start the Football Fall season. Not really all that surprised. Two weeks ago we saw a monster intraday reversal at key resistance levels in the major averages. We put out a note that afternoon before the market closed warning readers that short-term caution was advised for the next month. Sure enough, prices have been making lower lows ever since.
If you’re a candlestick guy like me, a day like that really sticks out. Those are some of the ugliest candles you’ll ever see and it literally creates a red flag:
I’m not sure that looking at bars and line charts would have given you that extreme of a signal. Individual candles really tell an interteresting story.
So going forward, I don’t think the time to buy this dip has come. Historically, on election years, US Equities tend to roll over and bottom out in October. We went over this phenomenon a few weeks ago and it seems to be playing out accordingly so far. I’d be surprised if these seasonal trends didn’t continue.
We’re still cautious on US Equities and we’d focus our attention elsewhere. There are other areas around the world trending better in the short-term.
Tags: $SPY $DJIA $QQQ
by JC
It’s the last week of summer and we’re not really expecting much. The final August work week is usually a snooze-fest. I hope I’m wrong, but probably won’t be. It’s just that time of year. So let’s not force anything if it isn’t there. As Ted Williams said, the most important thing is to get a good pitch to hit. Not mechanics. In other words, be patient and let it come to you. He also said that a good hitter can hit a pitch in a good spot three times better than a great hitter can hit a ball in a questionable spot. Think about that for a minute.
And with that, here are a few words of advice that some top technical traders have given us over the years:
They (traders) would rather lose money than admit they’re wrong… I became a winning trader when I was able to say, “To hell with my ego, making money is more important” – Marty Schwartz
To succeed as a trader, one needs complete commitment… Those seeking shortcuts are doomed to failure. And even if you do everything right, you should still expect to, lose money during the first five years… These are cold, hard facts that many would-be traders prefer not to hear or believe, but ignoring them doesn’t change the reality. – Mark D. Cook
The key to trading success is emotional discipline. Making money has nothing to do with intelligence. To be a successful trader, you have to be able to admit mistakes. People who are very bright don’t make very many mistakes. Besides trading, there is probably no other profession where you have to admit when you’re wrong. In trading, you can’t hide your failures. – Victor Sperandeo
There are old traders and there are bold traders, but there are very few old, bold traders. – Ed Seykota
Everything’s tested in historical markets. The past is a pretty good predictor of the future. It’s not perfect. But human beings drive markets, and human beings don’t change their stripes overnight. So to the extent that one can understand the past, there’s a good likelihood you’ll have some insight into the future. – James Simons
You have to know what you are, and not try to be what you’re not. If you are a day trader, day trade. If you are an investor, then be an investor. It’s like a comedian who gets up onstage and starts singing. What’s he singing for? He’s a comedian. – Steven Cohen
Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead… my guiding philosophy is playing great defense. If you make a good trade, don’t think it is because you have some uncanny foresight. Always maintain your sense of confidence, but keep it in check. – Paul Tudor Jones II
Thanks guys!
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