"We risk becoming the best informed society that has ever died of ignorance"
- Rubén Blades

"You can't make up anything anymore. The world itself is a satire. All you're doing is recording it"
- Art Buchwald

"It's getting exciting now, two and one-half. Think of everything we've accomplished, man. Out these windows, we will view the collapse of financial history. One step closer to economic equilibrium"
- Tyler Durden

"It is your corrupt we claim. It is your evil that will be sought by us. With every breath, we shall hunt them down."
- Boondock Saints

Monday, March 19, 2012

Synced Delineators: Positive Trend Is Strengthening

In the midst of a fantastic 2012 run for the US financial markets, there are many questions being floated around about what is causing it, when it will end, who is causing it, etc.  Just turn on Bloomberg or CNBC during the day and you can hear a myriad of questions being asked.  As a user of HFT Alert's Delineator and Accumulator software, I have enjoyed wondrous laughs as uncertainty is driven to the masses through broadcast television.  I let the J. Paulson's, Huge Hendry's, and Whitney Tilson's of the world worry about why and what.  For me, I'm concerned with the base of the market itself.  We have a market of stocks, not a stock market.  Understanding the base sentiment of the participants is my holy grail.  After years of trading and struggling to produce a top quality product, I've discovered the power of this software created by HFT Alert.  

We've read how the CFTC is now beginning to equip itself for monitoring HFT even after they have unleashed the beast into the market without having a full grasp of its positive and negative externalities.  Really though, can we trust Gary Gensler (4th paragraph) in the wake of the MF Global news that he withheld the introduction of regulations to help dear Jon Boy?  In Money & Speed we heard how it would be nearly impossible to convince tax payers to pay for the brains and power required to monitor this activity in real time.  Unknown to them however, there is a small sect that is already doing this and offering real-time updates to traders as a free service, even promotional for their product.  Many of my followers only follow for the HFT information.  This small sect of "free-lance" market surveillance providers consists of Nanex, HFT Alert, Themis Trading, and CC.  To be fair, I use the service, those guys create it.  We all try to help the many traders that browse stock chat rooms, utilize StockTwits, and basically try to make sense of this irrational market place and the irrational talking heads that report on it.

So if you're like @SellPuts (website here) and you have seen behavior that just doesn't make sense, you can do it the hardcore, bad-ass trader way and figure out that computers are running the show (see what he did here, its remarkable) using simple logic coupled with a deep understanding of markets and the psychology of the traders involved, an understanding that is gained by not partying all day on St Pat's day and nursing a hangover the next day.  He lays out the very reason we, as HFT surveillance traders, track SPY first then trade the arbitrage on the individual equities once dislocations are identified.  The understanding he has of cash markets and futures is unmatched and is one of the many reasons CC follows and has contact with him.

The following article was written by Steve Hammer for ETF Digest (follow him on Twitter @HFTAlert), a site that opened itself to a better understand of this little known style of trading and helps to be a platform that disseminates truthful information on the topic.  You can follow Dave Fry, at @etfdigest and stay updated. 

Full disclosure: CC is a client of HFT Alert and we use HFT Alert, HFT Alert Pro, the Accumulator and the Delineator.  I am reproducing this article so that CC's followers can better understand what the tweet updates are about that release and retweet during and after trading hours.  If you are looking for a better understanding of how to trade in this market and not be attacked by the HFT, understanding this material will be crucial if you desire to use CC or any of the others as a form of useful, real-time information.

Written by Steve Hammer, 
Originally Appeared on ETF Digest

We knew on Friday that if signal weight opened moderately positive today that a new up cycle would be identified on the Primary (shown above).  We also knew that the Secondary, the daily trend, was in a position to identify a new up cycle now as well. 

The Secondary was not in a position to turn up when the Primary identified the last up cycle on March 7th that took SPY from under 135 to just over 140.  By the 13th, the Primary was overextended at +10,800 and had no where to go but down.  That down cycle ended this morning at 11:30 and for most of the day, both the Primary and the Secondary had identified new up cycles, a rare in-sync event.

But, the Secondary did not close up, due to exogenous factors (the rumor mill) that reduced signal weight just enough to keep it just fractionally down.  However, it will very easily turn up on Tuesday given only modestly positive signal weight. (Secondary, shown below)

Assuming the new up cycle on the Secondary confirms this week, our targets for SPY take it back to the pre-crisis highs in the 150 range as I have already mentioned in posts here on the ETF Digest starting on Feb 7th. 

With both Delineators in sync, price should easily rise into the mid 140 level over the next week.  Downside risks here continue to be well contained.  As we have been posting on the Delineator Journal website, portfolio positions remain long from Dec 21, 2011, where the previous up cycle on the Secondary began.  
I write the Delineator Journal throughout the trading day to assist new users in learning the disciplines behind the Delineator and Accumulator software programs.  Both of these software programs are non-price based indicators and are predictive of price.  If you would like access, please send me an email to steven@hcmi.com .  It's a good way of seeing what we're doing and it's free.