Wednesday, November 30, 2011

2011.11.30 Interim Long Term DJIA $ Gold $ Silver

DJIA / 12045.68 / 11079.58 / -1.65
Gold / 1717.00 / 1551.58 / -4.33
Silver /  3135.00 / 2855.05 / -2.53

My bias, given the low volume rally, is that the end of the month spike in the DJIA and PM's was an aberration and prices should adjust down in the very near future. For the DJIA, the predicted price is again at historical levels below the actual price, which has not lasted  longer than 5-10 trading days in the past. The same can be said for the PM's. The usual short term predictions will be available late Friday.

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El Viejo said...

European news rally against multiple simultaneous recessions? Recessions will win every time.
I have wondered about the monthly low volume rallies also. Seems like they come before the middle and end of the month. I don't understand the mechanism of low volument rallies. What makes the prices go up exactly?

Paolo said...

Well, I could tell you what Richard Arms thinks about it in his book "Volume Cycles in the Stock Market" but I'm not sure it is as relevant now with machine driven trading.

One of the 'algorithmic' secrets of the HFT's is to test the response of the price to a sell or buy of the equity or the underlying options, from which a response curve is generated. On low volume days, I suspect it is easier to target equities that have a "good response" depending on their reaction to buys and sells, especially if they are large caps in the indices. I think once a target gets identified, you see larger volume in the equity - and the price movement is magnified.

Pure conjecture here on my part.

El Viejo said...

Interesting. PID Loops are mathematical control loops with manually entered variables P,I,D.
There are self tuning PID loop controllers that also test the response of the system with a step increase or decrease. It then tunes its 3 variables accordingly.

Paolo said...

OK - I had to go look up PID Loop controller. Very cool concept. It parallels the neurological feedback loop controlling muscle movement.

It would also be expected to generate some kind of power-law response to magnitude of error given its recursive nature.

To clarify my previous post above - I know from quants that algorithms are used to test buy/sell responses in the markets - the conjecture was as it applied to low volume days.