Price Patterns.

[Paul71]

If this is the case,....why should it have, 'key levels'?

 

[Paul71]

Where would the Dow be without the 30 stocks that make it up?

What is more important?

The average level?

Or the 30 stocks that make it up?

Which stock dominates the Dow?

Is that at a key level?

Which stock is the worst performer of the Dow?

Is this at a key level?

 

[Paul71]

What stocks on the S&P are at key levels?

 

[Paul71]

Could Wyckoff, explain?

Is there such a thing as an 'average' 'Springboard and Hinge'?

Just a thought DB, and in no way meant to be patronising or condesending.

 

[Paul71]

How can you apply 'intent' to an average?

How can an average show a 'weak hand'?

Is there such a thing as an average 'candle', and all the information it holds?

Why should fibs work on an average better than a single stock?

 

[Paul71]

500 stocks moving every minute, the S&P500 moves as an average of these every minute itself....it moves precisely using S/R....it creates the same patterns as single stock?

That's some computing power going on.

 

[peto]

If the S&P index is only an average of 500 stock,...then there is no real structure to it!

If this is the case,....why should it have, 'key levels'?

500 stocks moving every minute, the S&P500 moves as an average of these every minute itself....it moves precisely using S/R....it creates the same patterns as single stock?

That's some computing power going on.

Hi Paul, surely the explanation is simpler than you suggest. most indexes have an actively traded future, none more so than the S&P with it's ES. When the future reaches a "key level" the market participants sell [or buy] it; and the arbitrageurs and bots begin selling baskets of the component shares to bring down the index.

Because futures average at 'fair value' above the index price, there will be a close correlation between "key levels" of the index and those of the future. In the above scenario the future might be said to be 'leading the shares', in other scenarios the reverse might be true.

 

[Paul71]

Hi Paul, surely the explanation is simpler than you suggest. most indexes have an actively traded future, none more so than the S&P with it's ES. When the future reaches a "key level" the market participants sell [or buy] it; and the arbitrageurs and bots begin selling baskets of the component shares to bring down the index.

Because futures average at 'fair value' above the index price, there will be a close correlation between "key levels" of the index and those of the future. In the above scenario the future might be said to be 'leading the shares', in other scenarios the reverse might be true.

Hi Peto, thanks for the input.

Does the S&P 500 futures index rely on the movement of the individual stock futures for it's average movement or is it a market in it's own right?

What i'm more interested in is movement from A to B, and what governs this.

I'm glad you have brought up the subject of the S&P 500 futures though.

Reoccurring price patterns need reoccurring buying and selling patterns, some kind of structure.

A cash index relies on other components, a futures index is a market in it's own right and yet the movement of the two can be very similar indeed and produce the same patterns.

Maybe i'm not very good at explaining myself🙂

I'll be back, later.

 

[Paul71]

A question of value.

For the S&P 500 cash to move in more or less the way as the S&P 500 futures, they must hold the same values, this may seem obvious.

The buying and selling of 500 different components, is creating the same movements as the buying and selling of the future contracts of the other market, which is singular in form.

Cash and futures indexes are totally different at the molecular level (for want of a better description), they may possess the same 'value' as indexes, but, what is moving them internally is totally different and yet the volumes are very similar on all time frames.

Cash and futures. (S&P 500 indexes)

Is independent volume moving them both?

Why is the futures volume the same as the average index volume, when the average index volume is representing an average of 500 stock and the futures volume is just representing the amount of interest in the contracts.

There is something very exact in the values, maybe too exact for my liking, it's as if the future and cash know each others values even though they move on a totally different basis.

I certainly don't think the markets are free markets, they are under very tight control.

How anyone can seriously look at the markets and come up with 'random' is beyond me.

They are random, but, only when they need to be.

 

[peto]

Hi Peto, thanks for the input.

Does the S&P 500 futures index rely on the movement of the individual stock futures for it's average movement or is it a market in it's own right?

What i'm more interested in is movement from A to B, and what governs this.

I'm glad you have brought up the subject of the S&P 500 futures though.

Reoccurring price patterns need reoccurring buying and selling patterns, some kind of structure.

A cash index relies on other components, a futures index is a market in it's own right and yet the movement of the two can be very similar indeed and produce the same patterns.

Maybe i'm not very good at explaining myself🙂

I'll be back, later.

A question of value.

For the S&P 500 cash to move in more or less the way as the S&P 500 futures, they must hold the same values, this may seem obvious.

The buying and selling of 500 different components, is creating the same movements as the buying and selling of the future contracts of the other market, which is singular in form.

Cash and futures indexes are totally different at the molecular level (for want of a better description), they may possess the same 'value' as indexes, but, what is moving them internally is totally different and yet the volumes are very similar on all time frames.

Cash and futures. (S&P 500 indexes)

Is independent volume moving them both?

Why is the futures volume the same as the average index volume, when the average index volume is representing an average of 500 stock and the futures volume is just representing the amount of interest in the contracts.

There is something very exact in the values, maybe too exact for my liking, it's as if the future and cash know each others values even though they move on a totally different basis.

I certainly don't think the markets are free markets, they are under very tight control.

How anyone can seriously look at the markets and come up with 'random' is beyond me.

They are random, but, only when they need to be.

The ES is it's own market, its price is determined by the market forces of those who buy and sell it's contracts. The contracts expire four times a year, and are settled on the then S&P index price, according to set rules. So if at any moment (when both markets are open) the index and the future become out of step then an arbitrage opportunity exists.

Say the ES is bought enthusiastically ahead of the index, computerised programs will start buying shares and selling the index, knowing the balance must be restored sooner or later, when the positions can be closed at a profit. This arbitrage activity will in fact very quickly bring the 2 back in line, which accounts for the similarity in price you are observing. The volumes will also bear similarity, whatever stirs up the equity traders will interest the futures players.

As for the random bit, my opinion is that there are indeed observable patterns, but the patterns fail to conform to expectation as often as they 'behave', so any bet on the outcome of a price pattern has a random chance of success!

 

[nine]

As for the random bit, my opinion is that there are indeed observable patterns, but the patterns fail to conform to expectation as often as they 'behave', so any bet on the outcome of a price pattern has a random chance of success!

You may want to work harder at the context of your pattern recognition if you see conformation as 50/50 rather than 60/40 or better. If by random you just mean uncertain then please ignore the suggestion.

 

[Paul71]

Market participants and volume analysis.

S&P 500 cash(average), S&P 500 futures index, S&P 500 ETF index.

Overlay the 3 charts, you will see all possess the same price movement and volume.

What could be deduced in terms of volume analysis?

Are the same players involved in the three different markets, making the same calls to produce the same price movements?

Why does the E-mini or ES produce the same movement?

Is volume moving these four markets which are 'relatives' in the same way?

The E-mini is designed totally different from the cash average and yet it moves the same.

Is this volume?

Who ever said that volume or buying and selling was absolutely guaranteed the only entity that moved priced?

If this is the case, if buying and selling is the only entity that does or should move price, then the examples of the S&P that i have put forward should start you to think (i hope).

Maybe it's me (and probably is), but something just doesn't add up.

This could easily drive me nuts.

Thankyou.

 

[peto]

You may want to work harder at the context of your pattern recognition if you see conformation as 50/50 rather than 60/40 or better. If by random you just mean uncertain then please ignore the suggestion.

Hi nine, no doubt you are right, I did spend a few years trying to make a profit from patterns but probably quite a while longer would have been necessary. I got bored in the end, and my researches are in other areas now. The study of charts with hindsight certainly shows up some beguiling patterns, its just seeing over that hard right edge that causes me problems!

 

[Paul71]

The ES is it's own market, its price is determined by the market forces of those who buy and sell it's contracts. The contracts expire four times a year, and are settled on the then S&P index price, according to set rules. So if at any moment (when both markets are open) the index and the future become out of step then an arbitrage opportunity exists.

Say the ES is bought enthusiastically ahead of the index, computerised programs will start buying shares and selling the index, knowing the balance must be restored sooner or later, when the positions can be closed at a profit. This arbitrage activity will in fact very quickly bring the 2 back in line, which accounts for the similarity in price you are observing. The volumes will also bear similarity, whatever stirs up the equity traders will interest the futures players.

As for the random bit, my opinion is that there are indeed observable patterns, but the patterns fail to conform to expectation as often as they 'behave', so any bet on the outcome of a price pattern has a random chance of success!

Hi Peto.

Thanks for the post. The arb activity is an interesting point, this could apply to stock futures, 500 stock futures for that matter.

Are single stock futures the answer to my questions? 🙂

Just nipping the shop......

 

[dragan53]

stophunt creates a pattern

but when trading live its hard to spot every pat👎tern,but when u look at history it looks wasy

 

[kathreeds]

What makes price patterns keep re-occuring? Triangles, whipsaws and all that.

News?

Volume?

Indicators and Systems?

Do price patterns spontaneously happen and nobody knows why? Do you know?

One should keep in mind that the markets are dynamic. Generally The forces that motivate price movement are dynamic, and the participants are dynamic. Therefore any system which has performed well on past historic data may decline in value as the evolving dynamics of the markets change over time.The assumption is made that trading results can be improved when trading skills are improved. This requires practice! Surely any time spent learning to trade on past historical data, will not be wasted when it comes to preparing to trade for the future

 

[Joseff]

What makes price patterns keep re-occuring? Triangles, whipsaws and all that.

News?

Volume?

Indicators and Systems?

Do price patterns spontaneously happen and nobody knows why? Do you know?

Answer is simple - traders. We believe they will work and they work.

 

[darktrade]

Answer is simple - traders. We believe they will work and they work.

Good insight

 

[15 min tlb]

What makes price patterns keep re-occuring? Triangles, whipsaws and all that.

News?

Volume?

Indicators and Systems?

Do price patterns spontaneously happen and nobody knows why? Do you know?

Random data can create illusions of patterns set ups etc , do they really work or just self fulfilling prophecy?

 

[darktrade]

Random data can create illusions of patterns set ups etc , do they really work or just self fulfilling prophecy?

This is irrelevant IMO. The relevant aspect is whether one does his statistics homework to eliminate random from non-random. I am amused with all those journalists who have no idea of statistics and frequently publish those articles about patterns found in random data. They should be doing something else.🙂