BarroMetrics Views: What A Difference A Day Makes

On Wednesday, the papers were filled with doom and gloom and filled with stories about the ‘certainty’ of a double dip recession. Today we are told that figures yesterday in the US and China have negated the ‘double dip’ at least for the moment.

If ever there was a day that demonstrated why I use technicals to trade (supported by Pete Steidlmayers’ classification of fundamentals as context), it was yesterday.  The technicals have been suggesting that we would be seeing a rally, so yesterday’s price action comes as no surprise. By the way, this is not hindsight bias:  since August 24, the free daily update on the S&P has been giving reasons why a rally was on the cards.

In the same way,  the call for inflation is premature.

In my view, despite all the talk of quantitative easing, inflation won’t be a problem until the ‘easing’ hits Main Street. It won’t hit Main Street until the banks see fit to start lending again. How will we know that the banks are starting to lend? By keeping an eye on the St Louis Adjusted Monetary Base chart.

Figures 1 & 2 show the same picture; Figure 1 is  seasonally adjusted while Figure 2 is the raw data. We should have  two to three months lead time from the time the AMB starts to fall (i.e. banks start to lend) to the time the CPI starts to climb. When that happens, we can expect to see pressure on US rates and weakness in the US$ as the word ’stagflation’ starts to make the rounds.

This brings me to the final item for tonight: when can we expect a  Stock Market to hit a high? I can’t even begin to guess but I am interested to see whether the Kress Cycles will prove correct. I spoke about these in Stock Market Cycles 2. The last Kress cycle that is yet to form a high is the 6-year due Sept/Oct 2011.

I read about Kress Cycles in Cliff Droke’s “Stock Market Cycles“.  The other night I rang Bud Kress and I have to say I was impressed with his sincerity. I am looking forward to seeing how his work plays out for my trading.

Usual Disclaimer: I receive no benefit of any kind for sales of Stock Market  Cycles or Kress’ work. I pass on the information as items I find interesting; and hopefully, useful in my quest for a positive expectancy return.

FIGURE 1: St Louis BASE Seasonally Adjusted

FIGURE 2: St Louis BASE Raw

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BarroMetrics Views: The Traders Round Table

On Thursday, September 9, I’ll be taking a large step to achieving a long held desire.

The answer to this question has eluded me for years: how do I give full value to those attending my seminars and workshops? Frankly it’s disheartening to see attendees spend two to three days of their life and $X, and within a short time after the presentation, act as if they never attended. In short, the dollars and time went down a black hole, with little to show for the effort.

Part of my answer was to re-organize  my structure so that early steps meant an investment of time and only few dollars. I now start with a 4-hour presentation for S$27.00 (about US$15.00) that offers all a trader needs to know, intellectually, for trading success. I stress intellectually because in this event, I present ideas. The experience is ideal for anyone who is comfortable acting independently and comfortable with applying ideas .

The second workshop is a 2-day workshop for S$650.00 (about US$425). This takes the 4-hour structure and fills in the details. It comes with a 30-day service where attendees ask questions on the material presented. As long as the attendee is prepared to work at the seminar material, success will come. This is the way I learned Wyckoff and the Profile. I can’t remember how long it took me to become comfortable with Wyckoff, but I do recall it took me nine months to learn to apply the Profile. This workshop aims to reduce the learning curve for attendees.

From my point of view, the great things about the two stages is there is only a small dollar investment. If the attendees decide to walk away, it’s no big thing.

The third stage is a 12-week mentor type course. It’s priced at S$4750 and comes with a money-back guarantee. I figure that by the time the student gets to this level, she ought to know if she is serious about becoming a successful trader.

So where does the  launch come in?

Thursday’s launch allows me to offer students additional support in the form of weekly reviews of the material and live examples of their application. It also provides a venue for traders to recover or strengthen their discipline or to just meet other traders.

I am hoping that the Traders Round Table will meet my own outcomes - wish me luck!

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BarroMetrics Views: The Traders Round Table

Often I am asked: “Why do you teach?”

Sometimes I sense that the motivation behind the question is genuine curiosity; sometimes I sense that the motivation is: “you can’t be making as much money as they say - if you were that good, you wouldn’t be teaching”.

Both enquirers assume that my motivation for teaching is money. If that were true, then I would not teach. But my main motivation for teaching is not money. I do so because:

• I am good at it
• It brings just enough recognition to satisfy my need for status
• It enables me to strike long-term friendships
• It allows me to give something back to the market - in return for all that it has given me
• it may allow me to leave a legacy and most of all….
• It keeps me young and provides me with mental stimulus.

This last benefit was recently driven home.

A question asked by a coached student provided the spark that led to synthesizing the three disciplines I use in my trading plan: Barros Swings, The Ray Wave and Market Profile (under the Profile, I include the ideas of Richard Wyckoff - to me the Profile is an extension of  Wyckoff’s works). This synthesis allows me to change the material for the Habits of Success seminars. In that seminar, the challenge was to come up with a plan that:

• Did not require specialised software
• Had a reasonably high win rate with a positive expectancy. The Win Rate is important because the target audiences for HOS are traders who are struggling. A Win Rate that is around 30% will not cut it with this audience because of the baggage they are carrying - this is true even if the 30% produces a positive expectancy.

The HOS plan fulfills both requirements, but in the process, it produces about only one round a month per instrument. Because of this many HOS resorted to other plans; unfortunately, this led to a slip in discipline for the trading plan and as the discipline in this area gave way, the discipline in the risk management and journal keeping process also fell away.

To combat this I joined Tom Saw to set up the Traders Round Table in Singapore. For my students, the TRT provides them with the opportunity to join a community that will allow them to maintain their discipline. But I knew TRT would not be enough.

Then came the synthesis. This is why I am very excited about the ‘trading plan’  for HOS. Now instead of there being a gap between the foundational elements and the advanced section, we’ll now have a seamless whole. For the student, this means a more active trading rate without sacrificing the win rate and expectancy return.

On September 9, TRT will have a soft launch. I’ll be giving a two-hour talk. Watch for the registration link on these pages - some time this week. And yes, it’s a free open house and free talk.

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Ray Barros at CNBC’s new studio at SGX Bldg Singapore today:

Discussing the measures that the Bank of Japan might undertake to curb the yen’s rise, with Euan McCreadie, senior corporate dealer at OzForex, speaking with CNBC’s Oriel Morrison. Ray Barros, CEO of Ray Barros Trading Group, also charts the dollar-yen cross.

http://www.cnbc.com/id/15840232/?video=1577957268&play=1

Kirk West, executive director of international distribution at Principal Global Investors, is bullish on U.S. stocks, saying they could provide good returns despite a weak first-half. He talks to CNBC’s Oriel Morrison. Ray Barros, CEO of Ray Barros Trading Group, charts the S&P 500.

http://www.cnbc.com/id/15840232/?video=1577956523&play=1

Investors should hold off from entering the Thai market because its overextended, says Ray Barros, CEO of Ray Barros Trading Group. He shares his technical analysis of the SET as well as the KOSPI with CNBC’s Oriel Morrison.

http://www.cnbc.com/id/15840232?video=1578027650&play=1

Then Jim Rogers thereafter at studio:

Chia Woon Khien, head of FX strategy, emerging Asia at RBS and Jim Rogers, chairman of Rogers Holdings, discuss their outlook for the yen and euro with CNBC’s Chloe Cho & Yousef Gamal El-Din.

http://www.cnbc.com/id/15840232?video=1578027314&play=1

http://www.cnbc.com/id/38913263

Idkit

Ag Moderator

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BarroMetrics Views: Stock Market Cycles 2

Kress has 12 cycles, “2, 4, 6, 8. 10, 12, 20, 24, 20, 40 and 60″, all of which are related to the Fibonacci sequence in one way or another. The most important are the “2, 6, 10 and 30″.

CHIEF CHARACTERISTICS

Two Year: The ‘rule of alternation’ - an up year followed by a down year and vice versa.  But when larger cycles conflict, then the Rule of Alternation can be distorted.

Six Year Cycle: The 6-year cycle is due to peak in  late Sept/early October 2011.

Thirty Year Cycles: This is the dominant yearly cycle for equities. These cycles have a standard deviation of one or two weeks. This means that this cycle which peaks/bottoms in late Sept/early October, can form a high or low as early as mid Sept to as late as mid Oct. The last peak was in 1999 and a low is due in 2014.

Sixty Year Cycle; This is a composite cycle  that peaked in 1984 and is due to bottom in 2014.

Putting aside the 2-year cycle, there are only two cycles left that are pointing up:

1. The 6-year due to peak in 2011 and
2. The 4-year due to peak in 2012.

After that there is only the 2-year which is expected to peak in 2011, bottom 2012, peak 2013 and bottom 2014. As you can see, Kress cycles are looking for a major bottom in 2014.  In other blogs, I have expressed a similar view although arriving at the conclusion via a different route. If the Kress cycles are valid, I expect to see the 2011 high (Sept/Oct) to be a major high and the 2012 high to be a secondary one.

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BarrosViews: The Nature of Price Action

I was listening to an interview of S James Gates Jr. During the interview he said (more or less): “Many believe science is about truth; that is a misconception. Science is about providing the best possible explanation of what we observe”. The assumption is the explanation is based on the current state of our knowledge. As our knowledge increases and is refined so too does our explanation vary and change.

This ideas resonates strongly with me. It is an apt, fundamental explanation of how I trade the markets. I carry in my head a model of how the market (price action) behaves. I call this model the Tubbs Model after Frank Tubbs, not because he created it (he probably did not) but because I first saw it in his Tubbs’ Stock Market Correspondence Lessons.

Figure 1 shows the model. It is my believe that, so far as trading strategy is concerned, everything we need to know is contained in the model. The model itself is based on a number of critical ideas that found their best expression in Pete Steidlmayer’s Market Profile:

1. That the market is  an auction process. This means that under normal conditions, we seek to sell highs and buy lows; and under exceptional circumstances, we buy new highs, sell new lows. This means that the market must go too high to have gone high enough and too low to have gone low enough.
2. That the main purpose of the market is to be efficient. And the best expression of efficiency is the bell curve. The bell curve in the markets is found in congestion. Thus the main purpose of the market is  to seek congestion.
3. The second purpose of  the market is to facilitate trade i.e. the market will do what is necessary to generate the maximum participation. Hence the relationship between volume, range and direction provides a reasonable indication whether a market is likely to continue or change its current direction.
4. Finally, it is the context i.e. the current dominant structure that defines and gives meaning to the patterns we seek to exploit for profit. For example, in a sideways market, a lack of volume and range in the middle of congestion is different to a lack of volume and range in upmoves in an uptrend that has been in place for sometime.

FIGURE 1 Tubbs Model

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BarroMetrics Views: A Day at InvestFair

Boy did I boo-boo!

We (my partners and I) took a booth at InvestFair. As part of the parcel, we were given a 30-minute presentation slot. I chose to give a talk that I had given to a major prop trading house not a week earlier. The talk had gone over well at the prop trading house. I had to stay back over 45 minutes to answer questions - I always take that as a good sign; it means that I struck a cord with my audience.

Unfortunately, the same talk was a dud at InvestFair. As a presenter you know when you are losing the audience. Had I a 60-minute or 90-minute presentation, I’d have changed the presentation. But a 30-minute talk is very unforgiving.

So what was my material? I outlined what newbie traders needed to do to avoid being among the 95% failure rate. The NFA recently did a survey that showed that 95% of accounts lost so much of their account in 6 months to 9 months that they had to stop being traded. I figured that the material ought to be useful information. Only problem, we had less than desultory interest in the topic.

All of the other booths knew better - they spoke about magic tools and how to turn $500.00 into $5000.09. I’d have been better off talking about the Sept/Oct low in the S&P! (G) All well live and learn,

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Michael’s presentation

http://www.youtube.com/watch?v=TLqcmTJxams

http://www.youtube.com/watch?v=hbevrrDzyxw

Ray’s half hour presentation

http://www.youtube.com/watch?v=ObAdWMH03vM

http://www.youtube.com/watch?v=UwXrHxC5TxI

http://www.youtube.com/watch?v=eINpY6XOLeI

All taken with my iPhone.

Idkit

Ag Moderator

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BarroMetrics Views: Stock Market Cycles

This will be a short blog. I have just stepped off a plane and have to rush to a meeting. You could say that today  my schedule has caught up with me.

I am fascinated by time. Yet in my search for  a theory that suits me,  I have yet to find one with which I mesh with my price approach.

But perhaps help is on its way. Cliff Droke has written a book summarizing the ideas of ‘Bud’ Kress, ‘Stock Market Cycles‘. I found ‘normal’ cycle theory too variable for my tastes - what with ‘inversions’, cycles lows or highs ‘disappearing’ because of the influence of larger cycles and so on.

To quote Cliff: ” ..the Kress Cycles are neat, harmonious and whole, neither containing fractions or oddball numbers that don’t align with each other”.

The effect of this is we don’t have to worry about inversions and the like.  Tomorrow, I’ll talk about the mechanics of the Kress Cycles and how I have found them so far.

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BarroMetrics Views: Adieu Stanley Druckenmiller

Stanley Drukenmiller, seven years younger, and with 9.5 Billion Dollars more under management than I, has shocked the hedge fund industry by announcing his retirement.

Drukenmiller is an exceptional trader achieving around 25% for the last 10-year period (see Forex Traders). He is reported to be retiring because he is frustrated with his inability to return to profitability in 2010. According to BusinessInsider, his loss in 2010 was 5%.

Adieu Stanley Drukenmiller the  hedge fund world is poorer without your skills.

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