Jan

14

I've heard it remarked that modern multi-billion funds are involved in systematic "chart-painting" (i.e. pushing through stop-levels), then covering and possibly even reversing a profitable trade. I certainly have seen plenty of that happening in open-outcry era where locals sometimes managed to simply "yell the market" through a level of known stops, without ever doing a single trade! And yes, it can be accomplished even in the most liquid markets if you know the right spots and have enough capital to satisfy the limit orders resting there. A stark example can be found in EUR/USD trade 12/18/08 and again 1/13/09.

Following the 2008 collapse 1.6040->1.2329, followed by six-week rectangle consolidation, EUR rocketed at record-pace toward the 61.8% retracement mark of 1.4622. But on 12/18/08 it managed to slice through the level, peaked a full-figure over at 1.4717 — and swiftly reversed! Now today, it punctures 1.3241 level = 61.8% retracement of 1.2329->1.4717 run only to swiftly reverse precisely full-figure under at 1.3141. I wasn't much surprised: my charts were marked corresponding to this idea well in advance.

I'll be on look-out for developing situations in this regard.


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33 Comments so far

  1. Anonymous on January 14, 2009 5:25 am

    forgive my naivety, but what about enumerating occasions where this magical 61.8 proves irrelevant…

  2. Eht Yob on January 14, 2009 8:24 am

    "Now today, it punctures 1.3241 level = 61.8% retracement of 1.2329->1.4717 run only to swiftly reverse precisely full-figure under at 1.3141. I wasn't much surprised: my charts were marked corresponding to this idea well in advance." That is a classic!

  3. Jamshed Nazar on January 14, 2009 10:16 am

    Accurate observation on technicals….

    however, what is your opinion on fundamentals?
    eventually, the market has to be driven by fundamentals
    Eurozone outlook vs US outlook…

    Back in December, Trichet & Co did indicate a pause in rate cuts while Bernanke & Co raced to ZIRP . Now in January, the eurozone numbers show further deterioration and US is in a bit of positive mind set with the Obama inauguration.

    Eventually, the rate EURUSD has to be determined by US deficits, treasury debt, flow of Dollars in the market and growth in Eurozone vs US. In my opinion leverage has more impact in US / Anglo saxon world than in Eurozone.T wo simple examples,

    1) this is my fifth year in germany and I have probably received one or two offers for credit cards in the last four years.
    meanwhile, during my five years in US, I had minimum one credit card offer every week..sometimes two or three.
    US credit card, personal and mortgage debt is highly leveraged.

    In germany, home prices have nt appreciated in the last ten years.. maybe a couple of percent in some cities. So, [German] pple are less interested in getting a mortgage just for price appreciation (or buy to let as is a universal hobby in UK).
    Also, zero down payment is unheard of out here.

    Agreed that Germany does not completely represent Eurozone, and housing in Ireland / Spain and eastern europe is going through sizeable correction, however leverage or loss of it has less impact in eurozone.

    A weak dollar suits the US .. specially in the current climate. And I think the FED and Treasury will intentionally push the Dollar down to trigger inflation & exports.

    Meanwhile, eurozone does not have the luxury to spend its way out

    So, fundamentally EURUSD will continue the trend set since 2002 and should target 1.6 / 1.7 by the summer.

  4. Anonymous on January 14, 2009 6:44 pm

    Anonymous, I'm ready to oblige if you just provide your name.

    Yob, thank you.

  5. Anatoly Veltman on January 15, 2009 8:49 am

    Jamshed, very useful fundamental thoughts, keep 'em coming

  6. David Hipkins on January 15, 2009 8:50 am

    u mean me? my name is also irrelevant… i'm all ears…

  7. Curmudgeon 6721 on January 15, 2009 9:46 am

    Jamshed, thanks for publishing your forecast and the thought process behind it. I think you are right that the Eurozone is less affected by the credit and real estate bubble (except, as you note for Spain and Ireland). But I think there are other issues as well that may work in an opposite direction: the ECB is behind the curve in cutting rates and in a time of financial turmoil the USD may benefit as a safe haven (assuming it is still considered as such). How does it all add up… I don't know, but I think your reasoning is a useful starting point.

  8. Anatoly Veltman on January 15, 2009 10:01 am

    Yob means same as DAVID HIPKINS means nothing. A market pro (good or bad) should have a name. One shying one's name doesn't possess enough honesty to trade fast markets.

  9. David Hipkins on January 16, 2009 4:39 am

    my original enquiry re: 61.8 etc was an honest one…

    you are intelligent, i await yr answer with interest. david hipkins. (not an alias)

  10. Anatoly Veltman on January 16, 2009 12:09 pm

    look up my comment in Year-opener thread. I was preparing to short March Bond into anticipated wave2 pop, which classicaly equals 61.8% of wave1 decline. Tell me: what happened at 137′31?

  11. David Hipkins on January 16, 2009 1:25 pm

    mate, i sought an honest answer, not a rhetorical question

  12. Anatoly Veltman on January 16, 2009 2:29 pm

    I didn’t realize you don’t have live charts, sorry

  13. John Montreau on January 16, 2009 4:54 pm

    Anatoly,

    Your statements must be tested. Please provide a clear description of your method in a manner that it can be scientifically verifiable. I'll volunteer and do the testing and report the results.

    Let's put it to the test and stop this nonsense.

  14. Anatoly Veltman on January 16, 2009 10:10 pm

    John Montreau, I haven't seen your work — maybe you could refer me to it. I was answering David's query as to importance of .618 in real-time trading. The subject matter could take up a separate volume. Fact of the matter is that I've been paying CQG $1000/mo since 1986, and I have 30 live charts ticking in front of me, marked with levels in advance. As such, I had been prepared to trade both the high tick of Thursday 1/15 and the low tick of Friday 1/16 in March Bond (both retraced exactly 61.8%) — while "traders" who don't use charting software and don't even use their own name clog the airwaves with silly posts

  15. David Hipkins on January 17, 2009 8:26 am

    my patronising friend you have a bad attitude

    and to suppose that just because i am not on your particular wavelength that this invalidates me as a trader and otherwise betrays your own shortcomings as a person…

    ultimately all that matters in this arena is P&L…how noble of you to share your brilliant insights (your edge) (what could be the real motivation here i wonder?)…i can assure you if i had a quantifiable edge i wouldn't dream of sharing it with anyone!

    you may deride my comment but i have sufficient experience of markets to know that my CURIOSITY (no more no less, i don't actually care what you are doing or think you are doing…so long as i am able to do what i know i should be doing)is valid and that ultimately it is questionable whether what you do can be justified in theoretical terms…if it is apparently the source of your good p&l…as i said that's all that matters…for my part i am more interested in making money than in being right about such matters…

    as for $1000/mnth since 1986, 30 live charts etc…what a joke, you have misjudged your interlocutor…i don't even have 61.8% of your ego!

  16. Anatoly Veltman on January 17, 2009 11:54 am

    David, you posted five times in this thread, indeed it is no crime — but where is info? why using the most popular trading software is a joke?

  17. George Parkanyi on January 18, 2009 1:29 pm

    Hi Anatoly,

    I shorted bonds via 20+ maturuities treasuries ETF (TBT) on 31 Dec so it SEEMS like we're on the same wavelength, a few of my positions have retraced more than 61.3% from where I bought them, but I don't use real-time charts.

    All I want to know is - am I a silly trader? (This is very important to me.) Cheers, George

  18. Anatoly Veltman on January 18, 2009 11:05 pm

    George, I was addressing posters who are un-named, whose posts contain no market-related information; and who spew critique on a trader monitoring multiple real-time charts marked with important levels in advance. “It’s a classic!” they exclaim. On top comes more advanced group, still not employing serious charting - and demanding that somebody else’s discretionary trading were “verifiable” and “reproduceable”, no less. Unless one were Abebe Bikila, who made do without running shoes - how would one understand an olympian’s technique, let alone reproduce it?

  19. David Hipkins on January 19, 2009 2:56 am

    amazing how you could misconstrue a simple request… initially i was not being remotely critical.. .yr aggressive defensive reaction is interesting (not really that of a master)… after reading yr first post…. all i wanted to know is how one could rely on such an apparently arbitrary figure 61.8 (admittedly fib) in one's trading… and this is simply because while i look continuously at live charts (i know, it's impressive!) i am not interested in any forms of classic TA for my own trading… it was actually because i was impressed by yr reports on open interest etc that i enquired… again an area of little personal interest… i am an amateur who trades for a living successfully…

    finally, and this is a rhetorical question… OSOK… hmmm… i wonder whether the budding olympians get value for money there… and why would a crack trader be involved in such an enterprise?

  20. Anatoly Veltman on January 19, 2009 9:02 am

    I guess by defensive you mean replying to your posts. You haven't discussed markets. You wanted to enumerate something — let's see it.

  21. David Hipkins on January 19, 2009 12:16 pm

    the onus was always on you.. you have skirted the issue (eg 61.8 is a meaningful number because?!…)
    i cannot enumerate, am not sufficiently numerical…
    anyway, like socrates i am in a state of almost complete ignorance.

  22. Anonymous on January 19, 2009 7:10 pm

    I was kidding Anatoly. :)

  23. vic on January 19, 2009 7:55 pm

    would all posters stop berating and deriding each other so that we can maintain a reasonable decorum on this site and not descend to the level of the house of peers site. In the Junto we have a rule that uncivilized and personal invective is cause for the infracter to buy a round of drinks and Naval Officer Paolo informs me that this tradition continues in all modern navies. vic

  24. George Parkanyi on January 19, 2009 11:29 pm

    Anatoly, that last Anonymous was me. I wrote that from a different computer.

    Cheers,
    George

  25. David Hipkins on January 20, 2009 3:28 am

    here, here!

    Anatoly, mine's any spirit/liqueur which is 61.8%proof (btw a joke)

  26. Bob Gulstan on January 20, 2009 7:54 am

    How many rounds of drinks one has to buy for posting constant ballyhoo?

    Just curious…

  27. Anatoly Veltman on January 20, 2009 8:39 am

    Contract high in Mar Bond was 141′27.5; straight collapse bottomed at 131′23.5 - clean 10 handles! Subsequent wave2 bounce reversed at 137′31 = precise 61.8% of wave1. Overnite’s high has been struggling against 38.2% of current 137′31->132′18 drop. Implication: unless penetrated in US trading, this weak retracement raises odds of breaking 131′23.5 low of 2009 sooner, rather than later.

    Contrary to popular (and overwhelmingly clumsy) attempts and failures of most (but not all) quants to test and employ Fib retracements - a better method of application is not one-dimensional (the one that begins and ends with sampling “number of direct hits”). You’re advised to first determine current place within the Elliott Wave count - and only then apply corresponding Fib ratios). It takes precise instructions in both EW Principle and FibNodes, and then years of real-time application to succeed in such R&D. The reason that it ultimately has to be real-time is because of adding at least one more dimension (variable one; and possibly more than one). And this is where testing and application fails in 99% of attempts (unless you have resources of Rentec or Tudor). As I’ve said before re: testing completely separate indicator, when someone claims “I have totally tested this, and it proved failure” - all it means to me is that test inputs were deficient to begin with. If weekend soccer enthusiast says “scoring 11-meter kick is impossible” because he had failed against pro goalkeeper in ten tries - is his conclusion important?

  28. David Hipkins on January 20, 2009 12:00 pm

    thank you

  29. Anatoly Veltman on January 21, 2009 8:32 am

    Here comes one real grand study-case!

    GBP/USD is collapsing toward 1.3682 double-low of 1986 and 2001. One pip lower than that would put the Sterling offer at level unseen in 23 years (I remember those levels: I was just then transitioning from paper-trading in Business School to Reuters dealing, just as the Plaza accord surprised everyone but Soros…)

    Now we get Jimmy Rogers on BloombergTV: "I sold the last of my Pounds; I have to say that, unfortunately, the UK is finished!"

  30. George Parkanyi on January 21, 2009 12:58 pm

    That reminds me, I need to shed some pounds too.

    So what’s the big deal about 1.362? It’s just a price. I don’t see how you could draw any meaningful conclusions from how the market behaves around it. The fundamentals have completely changed, and money flows because of the credit crisis have completely changed. Who knows how long inflows and outflows will last, even if you got the direction right? I figure your odds are 50/50, and you just deal with the risk through money management.

    But I’ll leave it at that - I don’t know squat about currencies and have never successfully traded them.

    Cheers,
    George

  31. Anonymous on January 21, 2009 3:15 pm

    Post Dec 19 from Mr. Veltman himself
    “Kindly explain WHY should one be short British Pound at its current price?”

    …and this is from someone that puts himself on a pedestal of “great accuracy trading with 90% win rate and fundamental knowledge of markets”. Some fundamental knowledge…

  32. Anatoly Veltman on January 21, 2009 8:36 pm

    George, I frankly didn’t think about the fundamental side yet - if I do have something on that, I’ll let you know.

    It appears you missed all the action. Just hours after “Here comes one real grand study-case!”: precisely this thread’s headline did emphatically play out!! 1.3682 stops were forcefully triggered, wiping all stale Longs out of their Sterling (and some did get filled as low as 1.3620) to not see any trading below the 1.3682 level again for the rest of the day! I repeat: (as shortly as) 3 hours after Longs were forcefully extricated as heart-breaking low as 1.3620, price traded back over 1.4000!! I remember Vic always insisted that currency novices starting under him, throw down a few days and learn to figure out how much loss/gain such 380 pip up-move represented. So George - this is your homework; as soon as you revert with the answer, and multiply it by standard FX leverage - we’ll see whether fundamental discussion is even appropriate in the midst of classic technical set-ups like that.

    As to Anonymous, quoting Dec.16 thread - there was little wrong said within your quotation of me. It’s easy for me to stand behind everything I write - because it is always market-related and forward looking. I’m looking forward to your effort to do just the same - so everyone can take whatever useful they see out of your writing. Anonymous or using multiple nics - but write about markets, about what of consequence you anticipate and why

  33. Anatoly Veltman on January 24, 2009 11:48 am

    George, here is latest fundamental comment from my friend B:

    bktraderfx.com/site/fx-weekly-reports/fx-weekly-0123-013009-will-dollar-follow-pound-to-the-ground

    Heck if I understand what 10 paragraphs above mean for GBP/USD rate…

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