“Robert Miner’s new book should be on the “must have” list for every trader.” Larry Pesavento, tradingtutor.com
In the book, High Probability Trading Strategies, I did not use 240m charts for examples. Because most markets are now electronic and trade 24 hours a day (more or less), the 240m time frame is a good time frame between the daily and 60m.
Even through trading may be light outside of the regular exchange hours (ES as an example), the momentum cycles seem to continue as regularly overnight as during the exchange hours. Check it out.
Why the unemployment rate is improving.
COSTELLO: I want to talk about the unemployment rate in America.
ABBOTT: Good Subject. Terrible Times. It’s 9%.
COSTELLO: That many people are out of work?
ABBOTT: No, that’s 16%.
COSTELLO: You just said 9%.
ABBOTT: 9% Unemployed.
COSTELLO: Right 9% out of work.
ABBOTT: No, that’s 16%.
COSTELLO: Okay, so it’s 16% unemployed.
ABBOTT: No, that’s 9%…
COSTELLO: WAIT A MINUTE. Is it 9% or 16%?
ABBOTT: 9% are unemployed. 16% are out of work.
COSTELLO: IF you are out of work you are unemployed.
ABBOTT: No, you can’t count the “Out of Work” as the unemployed. You have to look for work to be unemployed.
COSTELLO: BUT THEY ARE OUT OF WORK!!!
ABBOTT: No, you miss my point.
COSTELLO: What point?
ABBOTT: Someone who doesn’t look for work can’t be counted with those who look for work. It wouldn’t be fair.
COSTELLO: To whom?
ABBOTT: The unemployed.
COSTELLO: But they are ALL out of work.
ABBOTT: No, the unemployed are actively looking for work… Those who are out of work stopped looking. They gave up. And, if you give up, you are no longer in the ranks of the unemployed.
COSTELLO: So if you’re off the unemployment roles, that would count as less unemployment?
ABBOTT: Unemployment would go down. Absolutely!
COSTELLO: The unemployment just goes down because you don’t look for work?
ABBOTT: Absolutely it goes down. That’s how you get to 9%. Otherwise, it would be 16%. You don’t want to read about 16% unemployment do ya?
COSTELLO: That would be frightening.
ABBOTT: Absolutely.
COSTELLO: Wait, I got a question for you. That means there are two ways to bring down the unemployment number?
ABBOTT: Two ways is correct.
COSTELLO: Unemployment can go down if someone gets a job?
ABBOTT: Correct.
COSTELLO: And unemployment can also go down if you stop looking for a job?
ABBOTT: Bingo.
COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to just stop looking for work.
ABBOTT: Now you’re thinking like an economist.
COSTELLO: I don’t even know what the hell I just said!
Now you know why the unemployment figures are improving!
Surfers and Traders
I’m spending the winter in Hilo, Hawaii. I probably have the best located condo in Hilo with a lanai (balcony) that looks over a nice, calm lagoon where we swim with sea turtles almost every day and also overlooks the coast off Carlsmith Beach Park which is adjacent to the condo building. Almost every day, we watch surfers off the volcanic, rocky coast off the park. Just off shore from the park is a popular surfing area for the locals.
A lot can be learned by watching or participating in activities seemingly unrelated to trading. What trading lesson can we learn from the surfers? Plenty.
Depending on the lookback period, the ES weekly momentum has been OB for several weeks. The 8,5,3,3 daily DTosc made a bear reversal Feb. 10 with price at the July high, often a resistance area. Even through the daily momentum declined to reach the OS zone and make a BullRev today, price had only moved sideways. Dual time frame momentum setups are a great filter to identify a potential trade opportunity, but PRICE does not always reverse with a momentum reversal. High Probability Trading Strategies shows many of these momentum/price divergences. We never know if price will reverse with momentum but we do know a dual time frame momentum setup should be considered. Ideally, a trade is only taken if other factors such as price position, pattern or time position suggest a probable reversal.
The beauty of the dual time frame momentum strategy is the initial capital exposure should be very small if a trade is taken. I’ve made a couple of attempts at a bear position with a bear ETF in the past couple of weeks given the weekly momentum was OB and price near some time and price resistance. Both attempts have been stopped out with very small loses. That’s the way it goes. That’s the nature of trading. Some are winners and some are losses. A major component of long term success only is trades are taken with relatively small capital exposure so no loss or even a series of small losses will damage the account.
With strong trends, EVERY price based momentum indicator will make reversals even when price does not. It is the nature of price based momentum indicators. More on this in High Probability Trading Strategies and how to protect yourself with objective, low capital exposure trade strategies and trade management.
With the weekly momentum extreme OB, I’ll continue to consider a bear position following the next daily momentum BearRev. You should also.
Check out Michael Lewis’s new book Boomerang to gain some understanding on the impossible situation in Greece and probable ramifications for the rest of the Euro zone. Any alleged “solution” that may make the news is likely to be temporary. The implosion of the Greek financial system appears as inevitable as the implosion of the U.S. financial industry with the real estate crash appeared in 2006. The outcome may be worse in Greece. Lewis is also the author of The Big Short which is also a must read. He is a great writer and makes relatively uncomplicated what many writers make complicated. Check out Boomerang, a must read as far as I’m concerned.
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