Friday, January 13, 2012

2012.01.13 Experimental Silver Ultra Short-Term
















I executed the same routines as I did for the experimental DJIA, and while I don't use these cycle models to inform short term trades, this looks promising. Unfortunately, as I mentioned, it is much more CPU intensive than the usual cycle model and short-term trading model I normally use.  I may try it for the Gold time series.

8 comments:

Anonymous said...

The new Experimental Silver Ultra Short-Term chart is greatly appreciated. I have used technical indicators for years in my stock & metals purchases. The two that I use are Stochastics & TRIX. Your new chart with more input data looks close to what I expected since the older projection is smoothed similar to a TRIX indicator with the default setting. Many thanks, bat75

Paolo said...

You're welcome bat75. Since you have a lot of trading experience, I suspect you understand the limitations of any model, especially one labeled experimental. The reason good back testing takes a long time is that the model has to be rerun with different subsets of the data a few times to get an idea of predictive value. In the case of the exp model, the processing time is a limiting factor.

Thanks for your thoughts on the TRIX indicator. I confess I will have to reacquaint myself with the derivation. However, if two dissimilar models have similar outputs, it's always worth a look!

Anonymous said...

The technical indicators that I use are only based on current market data & go no further. The indicators measure market sentiment presented in a manner that indicates an overbought or oversold condition for short, intermediate & long term cycles. It is up to the individual to make an educated future projecton based on how the indicators look.
A decent website for checking these indicators is http://stockcharts.com
The changes that I make to the default chart to get a chart that I like are, 1) for RANGE use 3 years, 2) TYPE use OHLC, 3)Indicators, change RSI to Stochastics 80,20 - change MACD to Stochastics 500,20 -
for the 3rd. choice TRIX 40,20.
The symbols to use for each chart are $INDU, $GOLD & $SILVER.
These charts & your charts complement each other. The indicators flag when a market move is at a top or bottom for that cycle - your charts are good for projecting when & how long the move will last & the magnatude of the move.
As you indicated, nothing is perfect. At least we have some tools to use for the educated guess.
You are doing a great job & again many thanks, bat75

El Viejo said...

http://www.zerohedge.com/news/print-or-panic-trimtabs-markets-meltup

Paolo said...

If money printing is no longer a net positive for markets, who exactly will keep the systemafloat?"

Good question. It is ironic that while I rely heavily on mathematical cycle and trading models to inform short term investing, the only major economic textbook that made any sense to me was "Human Action" by Ludwig von Mises; and he was somewhat disparaging of math modeling of economic activity!

I definitely bought his whole concept of malinvestment and its aftermath driven by artificially low prices for money drve in turn driven by political expediency and perhaps gross ignorance. Something to ponder that in this financial system, the one tightly regulated price is that of short term money.

So - perhaps the cycle models will fail since they are about improvising cycles based on major cyclical "melodies" of the past.

Thank goodness my short term trading models continue to perform - and even seem to be improving as the coalescing herding behavior of market movers results in less noise on the tail end of the relevant time series. I could probably derive some kind of time series specific "herding index" based on the change in noise parameters over time. In my abundant spare time.

The gold and silver models are going to be out soon for this Friday - followed by the DJIA. I hope everyone has a great weekend!

Paolo said...

Bat75 - I still use - Richard Arms' "midpoint move" index which he brought to life in a couple of books. It is a heck of a lot easier with a computer - he used to do it all by hand! I'm glad you are finding the stuff here of some use.

Anonymous said...

Paolo - do not get discouraged with your models as there are factors at work that distort the markets that can not be incorporated into the models. We just have to accept & live with them.

1. The market prices are determined by hedge funds & day traders that trade on the news (which may or may not be all that signicant economically) of the day which may carry over for a period of time (the modern day use of electronic trading has increased market volitity) plus
2. The President's Working Group on Financial Markets (1988) - is continually manipulating (distorting) the markets.

Ultimately the cycles must play out - they can only be delayed for so long until true market forces take over.

Keynesian economics work for intermediate business cycles, however for the long cycle Austrian economics come into play.
One of the first in depth studies of business cycles was done in 1939 by Joseph Schumpeter, "Business Cycles". In this study he describes the long wave plus other shorter cycles.

Hang in there,
bat75

Paolo said...

bat75, the Fed's reaction to the events of late 1929 - one year later, when they finally recognized major deflation, was the same, though I suspect not as intense. The Fed began minting credit with an accomodative money policy while debasing the currency with respect to gold. I guess the current US Fed Chair wants to set some kind of record for adding to the Fed's balance sheet.

You are right that the short term machine trading adds a lot of autocorrelated noise within shorter time segments. One of the modeling challenges has been to isolate it appropriately to prevent statistical contamination of the larger cycles. I guess the next few months should answer whether the long term cycles can actually be abolished rather than simply stretched out in time. Thanks for your comments!