website header 2

website header 2

Wednesday, July 26, 2017

DISSECTING THE STOCK INDICES

“Boerse Frankfurt: Home of the DAX30.”

Over the course of my trading career, which spans more years than I want to admit, it’s only been until very recently [like this year!] that the stock indices have been able to be traded inside a PAMM [managed money module for you Newbies] using CFD’s, at excellent “net” trading costs with terms and conditions that actually favor the client. There have been other places and other times over the last 3 years that have tried to host stock indices, but they were fraught with some very disadvantageous structures and terms for trading.

Managed money software is expensive, and neither the brokerage houses and/or the LP’s are going to be the ones paying for it; nope, it’s the customers, and add to that structure all the people in the software companies who created it standing in line and wanting their piece of “your pie” as well, getting a piece of the commission structure and/or spread on every trade as a continuing royalty … yea, welcome to the wonderful world of finance, where the vast majority of brokerage houses et al view you as “muppet money”; i.e., to be taken advantage of and bilked as often as possible without getting indicted.

For years … and yes, I mean for years, from about 2005 – to the start of this year, I have been screaming at the top of my lungs, meeting with management types, and pleading with LP banks to get up off their collective asses and offer stock indices for trading that make sense for the investing public. And for years, I’d get blank stares followed by, “sure, we’ll look into it and get back with you”. [Yea sure, and Santa Claus is gonna visit too, right?] Back in the fall of 2014, it looked like ASSETS FX [Finland] was going to do what I had desired for a long time, but only after about 5-10 days of trading, the LP bank [Finsa] pulled the entire program for reasons nobody would ever divulge. Then came TRADERS WAY, and in the first week of trading they were marginally Ok … not great; at that time there wasn’t anybody that was “great” … but it only took days for the LP to double the spread, raise commissions, and start handing out outrageous slippage on fills that made the entire effort a non-starter.

So, why does any of this matter when there is FX, oil, gold, and some other markets to trade? SHORT ANSWER: Cuz starting in 2015 with the “Swiss Debacle” they all went into the “untradeable” category and are nothing like the markets they were prior to 2015. Anybody that trades any of that stuff currently has my sympathies; all of it is manipulated beyond belief with the simple objective of transferring wealth from customers to banks, in any way and amount you want to give it to them. And the “proof” is simple; just recently ZH had an article regarding the state of Commodity Pools and hedge funds. Both are facing terrible markets and trading conditions that are seeing their collective worst results since 1987, the year of the great crash. Why? Simple; “speed of light trading … crickets”; and there isn’t any way to recover from the spikes up/down that go 3 – 6 sigma and chew these guys new ones … rinse & repeat endlessly, and you got a nightmare on your hands.

Which brings me back to the stock indices; currently, trading conditions in the DAX30 have never, ever been better. Trading at Turnkey gives us a “net” trading cost of 0.62 index points, and intraday volatility right now is at its highest level of 2017. Simply put, a market that trades like the Dow30 used to trade before it and the SP500 became the poster boys for central bank manipulation starting in February 2016. And the amazing thing is, the index is priced at 60% of the Dow30, has a spread 300%+ LOWER than the Dow30, and most importantly has far bigger ranges than the Dow30. Liquidity is excellent, with the futures market in the DAX30 trading well in excess of 100,000 contracts a day; and, there is very little manipulation of the DAX30 by the ECB, which means it goes up and down, unlike the bullshit that goes on daily in the U.S. indices with propped up prices 24/5, and the vast majority of the gains coming on “vapors” when nobody is around. Open the idiot markets up, and you got butkus!

There are 2 conditions present in stock indices, not found in other markets that are very important, and are key in why I have always gravitated towards them for my trading; first in futures, now in CFD’s, simply because the CFD’s offer better flexibility in terms of managing your risk profile than futures ever have. The first is that, over the long term [many years and decades] stock indices go up about 80% of the time and go sideways to down about 20% of the time, and secondly, once past a certain range for the day, stock indices rarely put in reversals, very rarely put in double reversals, and while I won’t say there simply aren’t any, I can’t remember in my entire career of any triple reversals in price in the major indices. These two factors are “Yuge & Bigly”, and I have always used them to my advantage; you simply cannot find these two factors in any other group of markets.

Long time readers/clients know I used to trade the DAX30 almost exclusively before the offshore brokerage houses “got in the game” and started to offer CFD’s in the U.S. indices that were reasonable; up until just a short year or two ago, it was not unusual to see offshore brokerage houses quoting 6 – 8 index point spreads in the Dow30, and just as ridiculous 1 – 2 index point spreads in the SP500; anybody that finds this acceptable is nuts. But the DAX30 has been around on offshore electronic trading platforms since the beginning around 2003 – 2005; most often quoted around a 2-3 index point spread and maybe a commission or maybe “net”. Not the best, but not the worst either, and when it moved the spread wasn’t an issue.

However, and this is important … today the DAX30 futures trade on EUREX, and a 1 lot = 25 * the index, and the minimum tick change for price is ± 0.5 index points. If you trade the futures, obviously whoever you trade through is going to charge you a commission … usually futures commissions are now charged based on volume at the largest and best futures houses, and if you’re trading 1-5 lots and doing a couple of trades a day, you’re probably going to fall into the camp of traders under 5,000 lots per month … and that usually means a round turn [RT] commission of about $3-$4 per 1 lot … Ok, so it adds marginally no more than 0.01 index points to your cost … well, at Turnkey traders enjoy a solid 0.6 index point spread [except when news or important economic releases are due, and the spread may widen to about 1.6 – 1.8] with about a 0.02 index point RT commission. Now, you don’t have to be a rocket scientist to observe that our trading conditions are only fractionally higher than the futures market … somewhere in the 0.11 - 0.12 index point area, in a market that for this week the average 20 day MA [moving average] for ranges is right around 145 points! And, to top it all off, the PAMM gets the same cost structure with no added costs, no matter how many clients I have, as any individual account trading for themselves. How does it get any better than this considering the brokerage house and the LP banks must make money, and aren’t in the business of giving things away? SHORT ANSWER: “It doesn’t, won’t, and can’t GET BETTER THAN THIS”!

Since I switched over to the version 4 volatility algorithm, I have been involved in more statistical research and work than you know in the DAX30, going back and redesigning prior DAX30 algorithm code and signals, and adapting them to the new paradigm of “central bank trading”. Remember, the DAX30 is not nearly as manipulated as the U.S. indices; sure, take it down 500 points and see what happens next, but outside that, the ECB doesn’t mess around with the DAX30 stocks, it lets them trade [“gee, what a novel concept”.] That doesn’t mean there haven’t been changes, though, cuz there surely has been, the most notable being the number of large spikes during any given day; now much higher than before February 2016.

To broaden your scope and knowledge, here are the important components of the DAX30; 7 stocks make up approximately 60% of its price movement. I’ve listed them in order of name of company, percentage share of the DAX30 index, and the industry group they are in: SIEMENS/ 10.46% / INDUSTRIAL ELECTRONICS;  BAYER/ 8.95% / DRUG; SAP/ 8.91% / SOFTWARE; BASF/ 8.30% / CHEMICALS; ALLIANZ/ 7.84% / INSURANCE; DAIMLER/ 7.18% / AUTO; DEUTSCHE TELEKOM/ 5.18% / TELECOMMUNICTIONS. As you can see, it doesn’t take much to move this puppy, as a small group of stocks can have a very large influence on the index price.

As I stated in previous posts, I’m now trading the DAX30 from its European open … it gives us diversification, a non-manipulated market, and a guaranteed mover in the equity indices; like the Dow30 used to be before it became a policy tool of Twits in the faculty lounge. Again, I’m not anybody’s guinea pig for social research, and the FED’s unbridled, overt, manipulative actions in the U.S. markets are doing more damage than they can comprehend. My biggest fear is that come September & October, they are going to find out how bad it can be.

Turning to today’s trade … “can you say ‘vapors’ in the wee hours”? … isn’t it simply a coincidence that from 7:30 – 9:30 this morning, they can manipulate it before it opens but can’t move it ± 15 points over 2 ½ hours to save its life. Probably just a coincidence that once again, not only do the idiot institutional Chipmunks get to buy the high from the manipulators at prices that 2 hours earlier were much cheaper, but the same goes for anybody trading … sorry, you get nothing!

And so once again, you can clearly see the manipulation at work in U.S. markets; seriously, outside of a day or two over these last months, has there been any days where the Dow30 has put in a good rally DURING New York trading hours? SHORT ANSWER: “hell no, it’s been 99% vapors”. And today? Well, the talking heads will tell you we got the FED meeting results due at 2 P.M., and that’s keeping activity down; “excuse me, how come that didn’t matter to the assclowns who bid it up 80 points before the open”? [Well, we’re not supposed to ask questions like that are we?] As I’ve stated before, I’m running out of adjectives to describe U.S. equity markets … I’ve got a few adverbs and nouns I’m saving, but you hopefully get the drift.

Yes, by all means, let’s wait for the clueless FED at 2 P.M. … hurry up and wait is the watchword for the day … and then what? … can it move after the FED, or does it simply sit at “record-er-er” highs for the umpteenth day in a row, and we can do it all over again tomorrow?

Again today, the DAX30 [although we won’t know for sure until closing time at 4, but the cash market closes at 11:30 EST] is substantially off its projected range for the day of about 145 points, coming in right around 100 … yea, the FED at 2, but I’m not sure what the DAX30 will do with anything the FED says barring some “out-of-the-blue” shocking surprise. If it’s biz as usual, with the usual hypnotic bullshit that puts 99.99% of all traders into a coma, it probably won’t move much at all.

Still, there were some great version 4 algo signals today … especially early, even with the 3 dramatic spikes up before the sun was up … the first one was impossible to capture, as the market went up about 20 – 25 points in a heartbeat … the second one we captured for profit, which in my mind, is “about time”. Given the limitations of the day and the way it has unfolded, I’ll take it.

This coming Sunday, I’ll have the “Quick Guide” to the version 4 algorithm done and posted … just the basics of the “how, what, where, when, & why” I [we] trade the DAX30 & the Dow30 [when it’s not dead and/or being manipulated at the same time] … it’s short and to the point, with maybe a few examples, to get you going … the full manual goes into much more detail and explanation, with tons of examples as well as theory, logic, and risk profile. The “Quick Guide” isn’t a replacement for the entire manual, it simply takes time pressure off me to finish it the way I want without having to look at the clock. Since I don’t ever think in our lifetimes the FED will stop manipulating the equity indices for policy purposes, now that they’ve started and been somewhat successful, this most likely is the last trading manual I’ll do. Maybe in the future if it needs updating with current examples, I might do that, but the core principles and trading strategies I don’t think will change. Simply because of the way it trades [a/k/a “non-manipulative”], the DAX30 is especially powerful with the version 4 algorithm. Trust me; once you see it, think about it, and study it for a day or so, the logic and sheer “PROOF” that I offer that it works, will set off a fire in your head. It will be done sometime on Sunday, and you can either view it online or download the PDF to your phone, tablet, or PC. Right now, it looks to be about 20 pages long ± a couple of pages, so while it’s not idle reading, it’s not “War & Peace’ either, and it’s in simple “non-trader professional” English.

And for you “Newbies” out there wondering … and you know who you are … “can I understand any of this and then implement it”? … the answer is a resounding “YES” [everything is Grandma approved!] … you can use your laptop, tablet, or desktop PC to run the windows full version, and if need be, you can use the phone app [once you know what’s going on] for emergencies and/or emergency liquidations. Or, alternatively you can join the PAMM where I do it for you, details over in the “Download Links” section of the website. But, please understand, while trading is simple, it’s not easy; you follow the rules [always a big if] and it’s clear sailing … you don’t, it’s hello Pudding Business I missed you!

Markets right now are “dead” [DAX30 is closed]… see my shocked face … the manipulative “con job” pulled today and yesterday in the SP500 & Dow30, with the pre-open and then the subsequent action of each day, just a classic illustration of how the FED, in bed with their criminal TBTF bank buds, rob individuals and institutions on a daily basis. It’s criminal, but nothing will ever be done about it … learn it, live it, deal with it.

Ok, now for the clueless Twits in the Mariner Eccles building giving us their “oracle” findings after huddling in the faculty lounge cafeteria. Well, market does “not much” and VIX crashes to 8.84, an all-time record low … what an F-ing joke. “Ok, tell me again … how does the market rally 80 points on “vapors”, then open and stay in a bullshit tight range the entire day? I’ll tell you how; the same manipulators buying it in the wee hours are the same schmucks selling it to the public once the market opens … thanks, come again”! Nothing to add but how pathetic equity index trading has become in the U.S.; I’m outta here early cuz I can’t take watching paint dry. Onward & Upward!

PAMM spreadsheet directly below.



Time for the beach! … “the ice cream King” and I are outta here … until tomorrow.

Have a great day everybody!

-vegas

OUR TURNKEY FOREX “PAMM/MAM” IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!

No comments:

Post a Comment