Fun Chart - Compq 04 vs 16

I compared two similar time periods comparing the reaction of the market to the FOMC beginning to raise rates - last time was in 04...the results are uncanny. It is my belief fund managers are reallocation to less risky sectors. I have delayed the 16 chart by two weeks since when the actual announcement was made (12/15/15).

I am very curious to hear your thoughts!





Edited 1 time(s). Last edit at 02/06/2016 09:32PM by sonicwave.

sonicwave, yes- interesting. At a glance I bet a 10ma is even more interesting. Thanks, helpful to forex traders like me- suggests a turn on or about Valentine's day.


Gamblers roll the dice; Traders load the dice.

Here is the chart updated with today's action...uncanny how it is still tracking the move...

sonicwave, to add to your thoughts...

Data: YahooFinance

Gamblers roll the dice; Traders load the dice.



Edited 1 time(s). Last edit at 02/09/2016 05:49AM by baffled1.

Baffled1,

Does that sugest this year is different and that we will continue lower since there is a divergence at end - your chart showing it at end?

I am an analyst by profession so I love the charts. That said, it has been drilled in me for years to drop the engineering mindset and learn the art of trading. At the end of the day it would be great to see successful posts of how folks use this information. All the charts in the world will not help if someone is not able to execute. On a side note I do believe we have an oversold bounce coming sooner rather than later given the nature of the down move. Typically this would occur around President's Day. We will know soon. Best of luck!

-NCT



Edited 2 time(s). Last edit at 02/09/2016 12:57PM by NCTrader.

sonicwave Wrote:
-------------------------------------------------------
> Baffled1,
>
> Does that sugest this year is different and that
> we will continue lower since there is a divergence
> at end - your chart showing it at end?
=============================================
sonicwave, I'm not sure. That's why I posted that without comment . OTOH, there are previous divergences to look at.

Gamblers roll the dice; Traders load the dice.

I meant to add this earlier but didn't have time. My contribution to the charting discussion. These are the only charts I need for longer term perspective. Adding for the new GW students out there as folks continue to stumble across this forum. Below is a snapshot of current charts so that anyone can look back to end of Sept and see what happened. Note the following:

Quarterly - turning over end of Sept 2015 (3rd red candle from the right). Clear signs of "ready to pull back" end of September (3 months before the rate hike). Almost there, indicators turning, not quite yet, maybe another white candle and possibly a wick, maybe a bit of sideways, but signs of turning over within a candle or two (i.e., end of 2015 / early 2016). Remember this is a quarterly chart, If it turns over it will go down for a bit (each candle represents 3 months).

Monthly - same time period (end of Sept), definitely turned over, dropped down and sitting on middle BB, since price action still hasn't tested and failed (or diverged) with recent high then retest of most recent high is definitely possible. Also heading into FWTZ which supports hypothesis of bouncing on middle BB for now. If correct, couple of candles up (a month, two, maybe three0, fail retest or push through last high creating divergence. So far monthly confirms Quarterly.

Weekly - same time period (end of Sept), sitting on BB, indicators low and ready to rise. Heading into FWTZ supports a rise of 4 to 6, maybe 8 candles (short FWTZ given the position of the larger charts). Still looking for some type of retest of recent highs and cognizant of the possibility that it could get ugly by the end of the year / early 2016.





The above charts played out perfectly and were given indications long before the rate hike. Not shooting down anyone's analysis and like the charts provided earlier but wanted to provide perspective for those GW students that are struggling to figure this all out. It played out like a perfect script. GW said that if you do as instructed and do the work then the process can, at times, put you in correct trades right in front of big moves that are explained away by the financial media (i.e., rate hike). I personally believe the charts represent all known information at any point in time - novice, experts, etc. The rate hike was much anticipated while the economy is not as strong as the Government would have us believe. It is my opinion that the above chart representations end of Sep 2015 was simply the big boys getting ready for what they knew was coming.

Last but certainly not least for the new folks. Even though I, and many others, had an opinion of how this would play out I always look at the trading charts discussed in class and do what they tell me. Long term perspective is fine but I do not trade my long term view - I trade the shorter big charts as taught. My recommendation is to study your charts and do the homework as instructed. If you have free time do more of the grind work to get better at chart reading and not get caught up on trying to figure out if this time period matches some other time period in the past. It's nice to know but doesn't help your trading. Believe me, I like what was provided by Sonic and live in Excel/Tableau in my real job but trying to offer some guidance on how to get better and not get sidetracked.

Best of Luck to all and Happy Trading!

-NCT

sonicwave Wrote:
-------------------------------------------------------
> Baffled1,
> Does that sugest this year is different and that
> we will continue lower since there is a divergence
> at end - your chart showing it at end?
============================================
sonicwave, I've looked more closely at this now. I think you may have made a remarkable find. Later, what I may do (or maybe you will) is compare a larger cohort- maybe a dozen or half-dozen of these to feel comfortable with it. At this point, even considering it's a minimal amount of data, there's a couple things that don't appear "random":
1. Both plots are overall southbound.
2. With a mere 60 datapoints, you've shown negatively correlated convergence/divergence seven times. That's a bit much to be called mere chance. But that begs the question of why they're inversely related on a small scale but correspond downward on the larger scale.

That said, could I trade it? I don't think so. The 04 plot is making that smile. implying an upturn, right? But the 16 plot would have to struggle to make a similar smile. Bottom line, I say whatever you've been doing to trade as well as you have, keep doing it! But keep looking for stuff like this because you never know- some small discovery can lead to big profits, even if it's just about some single stock. That's happened to me, and I rode that thing like a hobby horse every time it ran.

Gamblers roll the dice; Traders load the dice.

NC Trader and Baffled agreed. As part of my bucket of things to do, one of them is to look at past market events (market or stock specific) and see how the market or stock traded into and out of that particular event.

In this case, I believe you cannot rely on the mere correlation to trade - evidence is what you need. However, based on the correlation you can have more confidence in your evidence :-)

In this particular case, it is my belief that one of the main institutional houses is making adjustments to its portfolio to reflect the FOMC's new set of actions...imho

I hear ya Sonic. I did quite a bit of that type of analysis early on. Eventually I realized that any pattern I found that seemed to be consistent became a self-fulfilling prophecy (or so I thought). Kept jumping on the first vibration that seemed to fit my research only to have the market slam the door after entering. I am not surprised that GW finally started teaching that history is the last thing one should consider as a "warm and fuzzy" after you decide a trade is present.

All of that said, I wish you the best. If you decide to continue down the historical research path, and I hope you do, let me offer one piece of advice to consider. Your research is based on one observation (2004) that is being used to test current market activity. The strongest pattern that continues to resurface is the 4-Year Presidential Cycle. The 4th year typically starts out weak and could see a bounce mid-year into the November elections. The 8th year of the cycle (last year of a two term president) is the absolute worst. The lame duck year when you know a new President has to be elected later that year. This has been studied many times and quite a few sources on the net.

Typical Election Cycle Returns
(We are in the first section - Election Year)




8th Year of 2nd Term President
Current Environment
Think about the last few 2 term Presidents in 8th year: Clinton - tech crash, Bush - financial crisis, etc.





8th Year Avg Returns: S&P




The rate hike could be impacting the current environment but we do not have enough evidence, or observations, to really test. I do think the 4-Year Cycle above holds water and is definitely contributing to recent movement, possibly in combination with the rate hike. I hypothesized many years ago that to improve the 4-Year Presidential Cycle all we had to do is overlay it on top of the 10-Year Decennial Cycle. Never took the time to test but it seemed to explain some anomalies when looking at each cycle independently. Eventually I gave it all up as I was too caught up in the research and needed to refocus on reading the charts and what they were telling me.

-NCT



Edited 3 time(s). Last edit at 02/11/2016 07:49AM by NCTrader.

Just for kicks - it's a fun chart! Here is latest update