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Friday, March 23, 2012


I IS TIME TO DO SOMETHING ABOUT THIS




I was trading emails with a close friend and fellow trader yesterday during the last hour of trading, and once we hit 12:20 PST I sent the following email. "Here we are it is game time, perfect setup for the PPT to buy this." I am not sure if even 30 seconds passed before the ES moved up pretty sharply for a few bars. My next message was "In a democracy this should be illegal." 

There was a time I talked about his often in here, but over the last several months we just have not seen as much of this as we used to mostly because the market has just gone ever upward. There were no days that needed to be saved. I really could care less which way the markets move, I just want free markets. Like most people, I am not a big fan of interventions by governments. When someone like me can watch a screen and type an email like that almost to the second of when the futures have a mystery rally, you know someone is not right. I admit that I do not trade the ES or stock indexes that much anymore do to all of the shenanigans that go on.

There is also something else I need to make clear. Manipulations are not responsible for every late day save, or for that matter every rally on down days. There are natural ebbs and flows to markets, and when prices get extended reversions happen. This is statistics 101. Everyone except Gold bugs accept statistics. Statistics don't apply to Gold they will tell you because of ....... it can go up forever on it's own. With all of this aside, once you watch markets enough, you can tell when there is a buy program that makes no sense at all. It comes out of the blue when the premium is not out of line, nor are any of the other stats that signal when institutions initiate these.

If you look at the chart above, I have marked when around noon on days when the ES was net minus for the day, what happened in the last hour. You can see 5 of 6 days rallied nicely, one did not. I think we have all seen that in spite of all the complaining we are doing about our government and what they are doing to our country, they march on trying to take more and more control. At this point, if you can't beat em join em. We know they are going to either directly buy futures on these days at these times, or do it through intermediaries like GS and Morgan Stanley, so why don't we just tag along and pick up a few shillings for the trouble?

My project for the weekend is to study these late day saves that constantly happen and construct a mechanical method to trade them. My plan is just to check in at noon, see if whatever conditions I find to be the most consistent are in place, then take the trades. This is a different type of approach than watching a MACD or some other tool or group of them all day long trying to trade every wiggle. That is exhausting and not the way to make big money. You can grind out some money doing it but it is such a pain in the rear.

Most software programs will allow you to designate times intraday to program systems, so that is my starting point. One thing I like to do with trading as everyone knows, is back a daily trade with a fundamental condition. I feel this makes the trade better conceptually, and more likely to work and move more in the desired direction. This is difficult to do with intraday trading, fundamentals typically don't influence 5 minute charts. However, I would have to say now that the PPT is a fundamental. They have been operating in the markets for many years, and have become much more active on shorter time frames. The reason is irrelevant, although you can bet your sweet ... there would be hell to pay if they were launching sell programs and not buy programs.

At this point I am not sure where the research will lead whether it be to certain days of the week, days of the month? Possibly a different optimal time to buy than noonish? I suggest for those of you who like to day trade that this might be something worth checking into. We have an intra day fundamental, the government interventions on down days, lets quit fighting it, quit complaining about it, and take advantage of a government handout.

Have a good weekend

8 comments:

Anonymous said...

You probably right about these PPT rallies, but look at HO play this morning, looks like stop hunting algo runing it up & crushing in 3min. My point is that PPT & these kind of activities make a lot of other analysis useless, since you you have to get lucky to stay in the position, or it is going to chew you up so much that even when you get a nice move you just recouping your loses. Conclusion-
well, make your owm

HT said...

CJ - Are you still holding on to your gold trade? Or do you think there is going to be a sizable bounce before the next se setup?

Robert said...

Chris,
just wondering if you every shorted gold this week .i remember you talking about the COT report being very bearish and gold looked like a good short ---
also as you criticize us gold bugs it would be nice to see one of your blog article that didn't criticize us .Just seems every post has to dig the knife in just a little bit more on gold---
Gold today looks like it has set a daily cycle low , also the dollar going lower we could see gold go up for a little while here

Michael Treyder said...

good luck on your research! i just happened on to your blog and i think it's cool that you update every day. i'm a trader as well and i'm interested in reading other traders blogs. great site! i can't wait to read more posts from you.

Chris Johnston said...

Yes Robert I got stopped out on my gold shorts today for a decent profit and exited my silver shorts yesterday for a good profit.

futures brokers said...

Awesome that you are on this and getting the news out in understandable terms. Thank you.

Bob Lau said...

Hi Chris,

I got some stats in the final hour of trading on the S&P500. - Courtesy of Jeff Augen (options trader) Analyzing the data for the past 3 years reveals that the S&P500 has risen 28% since Oct 13, 2008 with the final hour accounting for 20%.

Bob.

Chris Johnston said...

Bob,

Thanks for those stats. For those of us aware of the PPT we all know this has been going on for a while now. There are some even better stats available from the Trim Tabs folks about the rally up from the March 09 low. The low volume of the whole move shows it is not the normal distribution of buyers as has been the case historically. Let's just hope the government never becomes a seller and just plays the long side only.