FTSE 100 September 2004

[bracke]

RogerM

Do you use AIM to trade and if so, how do you use it ? IE once a certain level has been reached do you trade the ftse and do you use AIM to determine your exit ?

Is the AIM programme generally available ?

How long have you been using AIM ?

Regards

bracke

 

[RogerM]

bracke - as the article on the AIM indicator only appeared in the August 04 issue of the TASC magazine I guess it's a bit premature to judge it's effectiveness. The article used the DOW and wrote the indicator based on all 30 Dow contituents. The formula for all the major TA packages that can handle custom indicators is given in the back of the magazine and subscribers can download the appropriate format for their s/w from the TASC website. All I have done is to adapt it to use the top 40 stocks by mkt cap in the FTSE100 - a simple task even for a technophobe like myself.

I have not done a formal backtest over a prolonged period, but it does look useful in a ranging market. And even in a trending market it appears to indicate a pullback or at least a consolidation.

I have only been using the AIM indicator for a couple of weeks. It is certainly not a single indicator "Holy Grail", but it does appear to be useful if used cautiously and in conjunction with other techniques. My initial view is to use it as a "frame of mind" indicator, so would hesitate to go long if it is near a high, and also be careful of new shorts if low.

An additional use which I have not investigated yet is to use it for sectors - amend the code to look at all UK banks for instance, and see what it indicates.

 

[bracke]

RogerM

Thank you for your reply.

Regards

bracke

 

[barjon]

roger

did you ever try it with sectors?

jon

 

[tradesmart]

Nice to see that the long call came together from

http://www.trade2win.com/boards/showpost.php?p=124238&postcount=250

when many were seeing bears dancing before their eyes, and I hope that Barjon has made a good wad from seeing the bulls……..

RSI is currently toppy but not showing any ND yet, so very likely we will see another run upwards to test 4600, when the current, so far, minor retracement has run its course.....

 

[bracke]

tradesmart

If / when ftse hits 4600 can I start growling and get the honey out in celebration of a large drop to come ?

Regards

bracke

 

[tradesmart]

Don’t try and call it prematurely, son – watch and listen for the signals, you might still need your matadors hat for a while yet…….



or not............. 😉





ps - noteworthy how the FTSE100 top caps VOD/GSK/BP are very strong just now........

 

[peterpr]

My 20/9 stochastic turned down yesterday and the signal line has crossed today.
RSI 20 using exponential MA turned down yesterday. Simple shows a small 'v' yesterday today - but still slightly higher than April and higher than at any time since 1st September 2000.
MACD 13/26 just turning - but no signal yet - not quite anyway.

That's a pretty impressive set of indicators saying we're a whisker from a major top - and funny thing is both the DOW and S&P are looking not too different with all kinds of ominous things afoot stateside - election not withstanding.

If it is down from here then I reckon it is likely to be a major one. Just project a quick slide of 50-100 points or so from now and what do you see? Either an enormous head and shoulders forming? or a pretty impressive double top?

Still haven't decided which hat to eat if it does touche 4630 this year though.

 

[RogerM]

roger

did you ever try it with sectors?

jon

not yet barjon - been too busy with other things! but I'll post when I do. Perhaps we need a separate thread to cover sector top down trades?

 

[bracke]

peterpr

It would have to be your bearskin.

Regards

bracke

 

[tradesmart]

Very astute and timely mention of “hats” in several posts above – I find this very significant in terms of trader psychology…….

If we are wearing the correct hat for the market conditions, will we ever place a duff trade……?!

Or do we need to change hats several times a day……?

I will leave you to ruminate on this……

 

[bracke]

Very astute and timely mention of “hats” in several posts above – I find this very significant in terms of trader psychology…….

If we are wearing the correct hat for the market conditions, will we ever place a duff trade……?!

Or do we need to change hats several times a day……?

I will leave you to ruminate on this……

Ruminate, isn't that what Bovines do.

So in addition to the correct hat we have got to have the correct intestines.

Regards

bracke

 

[tradesmart]

Ruminate

v. ru·mi·nat·ed, ru·mi·nat·ing, ru·mi·nates

1. To turn a matter over and over in the mind.
2. To chew cud.

Yes, there are definite bullish overtones here……
To prepare us psychologically for bull market action, it may help to talk about it …. ….

And the effect could be enhanced by wearing the correct hat……...

 

[peterpr]

Very astute and timely mention of “hats” in several posts above – I find this very significant in terms of trader psychology…….

If we are wearing the correct hat for the market conditions, will we ever place a duff trade……?!

Or do we need to change hats several times a day……?

Hats? figurative - substitute 'humble pie' as in eating.

Your hats analogy doesn't hold. How can you wear the correct 'humble pie' for market conditions. As for duff trades - don't we all?

No question of changing 'humble pies' several times a day either - though I do sometimes eat a few!

I agree that, too often we confuse timescales and the value of backgound (news) information in discussions of trading.

If by changing hats several times a day you mean running about like a headless chicken- well - no comment other than to say I spend most time scanning the horizon for the right wave so I can occasionally try to jump on and ride it - problem is it sometimes has a very nasty undertow.

My own strategic overall position has been consistent for at least 12 months now and is pretty standard stuff - namely that we are still in a bear maket that started back-end of 2000 and of which the march 03 to present is an impressive but now failing rally - not much use for trading though. Medium term? - test the 03 lows minimum. Next 2 weeks? down 50-100 points. Intra-day ? I'll look for quick in and out opportunities in either direction just like anyone else.

 

[barjon]

hey, ho - the opening following the 2 "indecision" near dojis had me run for the exit.

On my set-ups the uninterrupted rise has left me devoid of reasons to go short yet - other than listening to you beary boys, of course 😆 Talking of which, someone in the market seems to have been reading your posts judging from some of the panicky mark-downs today - azn; cpg; emg; rbs. The DOW though isn't paying serious attention yet (mind you it hasn't closed as I post).

live long and prosper

jon

 

[peterpr]

Anyone care to comment on volume.

The highest average daily volumes for the entire year were from 3rd week in June to about 3rd week in July which corresponded with the run down from the June highs. Yesterday we had the highest volume by far since 9th August (another big down day). Monday saw the 2nd lowest volume for a trading day this year coinciding pretty much with the top (so far) of the present up move.

The volume down from the June highs is particularly stiking averaging not far short of double that of the present up move. What makes it even more striking is that there was no corresponding seasonal volume changes last year which appears to discount the effects of the holiday period.

Worth a bit of cogitation eh? (or rumination if you're of a bovine bent)

 

[barjon]

peter

mmm, I raised it on the Price Volume thread #181 on page 13 but didn't get much of a response.

In hindsight it had to be significant. There was clearly a lot of selling going on but a lot of buying, too, since for every sale there must be a buy. It was then confusing to see such a strong rise but on low volume. I suppose you can only conclude that the buyers had exhausted the sellers in the down move and that there wasn't much supply about meaning that any buyers had to keep bidding up to winkle the sellers out.

All seemed contrary to the text books, but I suppose if we now get a very severe down move people will look at the wider timescale and see high volume down move, followed by low volume technical rally, followed by high volume plumb the depths fall as a classic demonstration of volume analysis. You'll be well into told you so mode then 😆

jon

 

[peterpr]

Jon

Suppose you have professional insight into the prospects for equities and it is turning a bit sour. You also have large equity holdings which you want to reduce (I'm talking about fund managers and big brokerages/market makers/investment banks here - the 'smart money' - people who can routinely move markets and know it). What is your strategy? - For sure you will try to avoid moving the market down

I suggest that, to maximise your average sale price whilst reducing your exposure you proceed as follows:

Close to cyclical highs you begin to (or increase) your selling. Close to obvious support you reduce/stop selling. Whilst all the time talking up the market. The lack of stock as upturns begin forces prices up - but it's not the 'smart money' that's buying - its the punters.

It's the 'smart money follows/creates the volume' argument.

OTOH - there are those who say that major tops end with a crescendo of increasing volume as buying mania from the non-smart money reaches a climax.

Are the two compatible? and if so what are the nuances?

Every sale/purchase requires a counterparty sure - but not all counterparties are equal. The 'smart money' is much more likely to be on the right side of the trend and vice-versa. The question is can volume really give us a genuinely useful pointer to what the trend is?

 

[barjon]

peter

Can't quarrel with any of that. The thing I've never been sure about is this big boys/pros vs herd/public punters argument. Given the vast weight of institutional money nowadays I suspect that it accounts for a very large percentage of the daily volume and I doubt that public punters make much of an impact at all, other than by the fact that it is they who ultimately provide the money for the institutions to play with.

For most of the public their participation is via funds, unit trusts and all the other clever vehicles the institutions invent and it seems me that that is a fairly slow process often likely to leave the institutions needing to place the new money they have received in a market where the value has long since disappeared. Like the final stages of the tech boom for example. They might hold different percentages of cash but if they receive the money they are duty bound to place it and they are reasonably content to do so as long as their competitors do the same. By the same token, if people take money out of their funds they must sell however strongly they may feel that the market is a buy.

At the end of the day if more money is put into the market prices rise, if it's taken out they fall.

So what we're talking about, maybe, is publicly driven big boys vs own account big boys. Maybe it amounts to the same thing 😆

Not sure that says anything about volume though, but if you scan through your charts you usually seems to find that volume spikes - even when drawn out - seem to herald some sort of change.

jon

 

[peterpr]

Jon

Good points about institutional dominance and the lags between public receipts/withdrawals and investment/selling decisions. Fund managers do have some discretion on their cash balances but for the most part seek to hold them at levels required to prevent the need for precipitate selling on the one hand and the fund prospectus investment objectives on the other. (I used to manage broker funds in the 80's - not quite the same thing I know - but the pressure to be fully invested was always present).

My guess is that most fund managers do pay some attention to short term timing (almost as though it was their own money), but that they are hostages to short-term cash-flow, over which - short of the market cheer-leading of their respective marketing departments - they have no control. As you say, it is the actual cash flow that is dominant - for that sector anyway.

What is far less clear is the impact of 1. Vastly increased leveraged involvement in the markets by hedge funds (over the past 10 years or so - where cash can be king and managers have near absolute discretion) and 2. The activities of the large non-fund manager institutions that operate on their own account.

At the end of the day we're operating in a vastly complex global market in equities, but one in which the real pros will ensure that amatueurs get badly burned and are unlikely ever to take more money from the markets than they do.

A couple of points about the present position

For 2 days running futures have closed almost spot on the actual market close with just a we bit of fluctuation either side between 4:30 and 5:30 (pretty much lock step with the US as usual I guess) - nervous, hesitant, looking for direction ??

But - take a look at today's volume - lower than yesterday but 2nd highest of the move up to date.

If it had been 20% or so higher it would have clinched it for me. As it is - I still reckon we're on the cusp of a turn but could just possibly see another attempt at 4570+ first.

Watching the US like a hawk!