Daily Speculations

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James Sogi

3/28/2005
Whiplash

To internalize the lessons of the market graciously shared herein it is good to turn to those things already ingrained into the heart. There is an aki jitsu moves whose name I do not know in which the practitioner, let's call him the Bull, defends against the aggressor who we will call the the Bear.

The Bull stands with a relaxed centered stance. The Bull sees the Bear coming at him making a thrust. The Bull, aware that timing and balance are everything and make the difference between life and death, quickly takes hold of the Bear's thrust and pulls back in the same direction of the Bear's thrust/punch/push without falling back off balance himself, and without pulling the Bear completely off balance in the direction of the Bear thrust.

The Bear sensing the pull and the potential for over extending and falling over himself, rapidly tries to to pull back violently, in a knee jerk reaction to the discomfiting feeling of being pulled off balance forward. At the instantaneous moment that Bull senses the Bear pulling back, still maintaining centered and relaxed stance, Bull then reverses in the same direction as the Bear's pullback, and using the Bear's jerk back reversing momentum, panic and overreaction, by adding a little extra push, is able to throw Bear off balance in the opposite direction. When timing, balance and awareness are right, it takes little or no effort beyond a gentle direction of the Bear's own overreactions.

This move captures the differences between the long side and the short side. The short side tends to be at a disadvantage because of the lack of inventory and the doubling up on the buys when the shorts cover and the other buyers buy giving that 'jerk back' effect described above known on the Street as the short squeeze. Thus a steady and centered bull has an edge to make money even in a bear market.

This is the essence of one reversal strategy from Linda Raschke she calls the "Whiplash" from her book Street Smarts. Since she spilled the beans there, I hope you don't mind if I test it here. She says in her book to find a unfilled gap down within 3 days, enter long as price reverses. Like a loaf of bread, It gets stale after 3 days. The test uses the gap day's open price for entry within last 3 days, exit moc after 3 more days. N 306 ; Std 23.8; T 3.1' w/l 59% ; Mean 4.2 (SP big adj. >94).

Looking out a bit longer, to join in the recent debate on the prognosis, for drops of over SP 40 pts or ~4% since 10-20 days ago, my tests show 1 and 2 months after are bullish with significant distributions since 94, but 3 months later returns are are random. The effect has been more pronounced in the last two years.

Allen Gillespie comments:

The best description of a bull v. bear fight can be found in one of the best books ever written, Lonesome Dove by Larry McMurtry Chapter 91.

But a week passed an they saw no Indians. The men relaxed a little. Antelope became more common, and twice they saw small groups of buffalo....The country began to chnage slightly for the better. The grass improved and occasionally there were clumps of trees and bushes along the riverbed...He felt the threat of drought was over...Traveling became comparatively easy...

The next day, as they were trailing along a little stream that branched off Crazy Woman Creek, Dish Boggett's horse suddenly threw up its head and bolted. Dish was surprised and embararassed. It had been a peaceful morning, and he was half asleep when he discovered he was in a runaway headed back for the wagon. He sawed on the reins with all his might but the bit seemed to make no difference to the horse.

The cattle began to turn turn too, all except the Texas bull, who let out a loud bellow.

Call saw the runaway without seeing what caused it at first. He and Augustus were riding along together, discussing how far west they ought to go before angling north again.

"Reckon that horse ate loco weed or what?" Call asked, spurring up to go help hold the cattle. He almost went over the mare's neck, for he leaned forward, expecting her to break into a lope, and the mare stopped dead. It was a shock, for she had been quite obedient lately and had tried no trciks.

"Call, look" Augustus said.

There was a thicket of low trees along the creek, and a large, orangish-brown animal had just come out of the thicket.

"My lord, it's a grizzly," Call said.

Augustus didn't have time to reply, for his horse suddenly began to buck. All the cowhands were having trouble with their mounts. The horses were turning and running as if they meant to run to Texas. Augustus, riding a horse that hadn't bucked in several years, was almost thrown.

Call drew his rifle and tried to urge the Hell Bitch a little closer, but had no luck. She moved, but she moved sideways, always keeping her eyes fixed on the bear, though it was a good hundred and fifty yards away. No matter how he spurred her, the mare sidesteeped, as if there were an invisible line on the prairie that she would not cross.

There was confusion everywhere. The remuda was running south carrying the Spettle boy along with it. Two or three of the men had been thrown and their mounts were fleeing south. The thrown cowhands, expecting to die any minute, though they had no idea what was attacking, crept around with their pistols drawn.

"I expect they'll start shooting one another right off," Augustus said. "They'll mistake one another for outlaws if they ain't stopped."

"Go stop them," Call said. He could do nothing except watch the bear and hold the mare more or less in place. So far, the bear had done nothing except stand on its hind legs and sniff the air. It was a very large bear, though; to Call it looked larger than a buffalo.

"Hell, I don't care if they shoot at one another," Augustus said. "None of them can hit anything. I doubt we will lose many."

He studied the bear for a time. The bear was not making any trouble, but he apparently had no intention of moving either. "I doubt that bear has ever seen a brindle bull before," Augustus said. "He's a mite surprised, and you can't blame him."

"Dern, that's a bit big bear." Call said.

"Yes, and he put the whole outfit to flight just by walking up out of the creek." Augustus said.

 

James Sogi is a philosopher, Juris Doctor, surfer, trader, investor, musician, black belt, sailor, semi-centenarian. He lives on the mountain in Kona, Hawaii, with his family