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Tuesday, June 3, 2008

It Is Possible to Sell Tops and Buy Bottoms Consistently

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I may edit this article tomorrow, so please consider it a draft at this stage as it may contains typos and is not complete. But I believe it contains a good part of the essence of what I want to discuss in this first article.
Let me start by indicating my trades today June 03, 2008. I went short a vehicle that follows the NDX at 10:12AM, and covered my shorts at 2:25PM. My two operations correspond to the top and the bottom areas of NDX during the cash session of today.
The proof is provided in a chart of NDX, and a copy of an execution report give at the end of this note. Note that if one sell calls, one is short delat of the underlying. In this case , at 2:25PM, I covered what I sold earlier at 10:12AM. The net position is shown to be zero.
I do not like to post copies of my trading reports, but I left that some people at the forum seem blind or pretend to be blind to facts. So my posting what is below, it would add the evidence made in a forum where the whole discussion started.

In that forum, I posed the question of whether it is possible to time tops and bottoms of financial markets (stocks, currencies, etc) consistently. I think I demonstrated it with enough evidence, and will come back to this point in future articles.

I have been posting market calls in that forum on this topic. I posted them in real-time (or few minutes thereafter) to show that it is possible to do so with a probability significantly higher than what one would expect from a probabilistic analysis of financial market. The calls have been impressive in timing daily tops, and bottoms. My calles nailed the bottom of March, and have been nailing the daily top of a large number of days, and in all (or most) cases have shown profit immediately (small) and definitely good profits in a window of 6.5 hours.

I have made a significant number of such calls in order to build a sample sufficiently large to test the hypothesis of consistently calling top and bottoms even at the level of a minute. To my "surprise", I found that some people are blind to facts, and seemed to be extremely bullish at tops, and extremely bearish at bottoms. I put the word "surprise" in quotes because I was expecting it it not to hold in a forum where possibly the cream of the crop of traders hang. I am wrong in my supposition.

I will dwell more on this topic, and other topics in future articles.

I want however to say that I decided to post some of my thoughts here, as certain contributors in the forum in question have become too much blind to engage in a meaninful and productive discussion.
In this blog they will not have the luxury to intrude and make statement that they themselves know are factually untrue. But I will not oppose them making comments here in this blog.

Today is June 3, 2008. I did not have the pleasure to post a market call as I did in the past. I did not wish that those who were intentionally unfair in their discussions continue to possibly profit from my calls. Therefore, I hinted my views in a post, but left the picture incomplete or inconclusive. But I knew that the bright of the readers, and contributors (and there are some) may read well enough my mind to understand where I might stand. Of course it is understandable that they may have various interpretations of my statement.

As I indicated earlier in this note, I want to tell you, my dear readers, what I did today, and provide you with a screen shot of my trades of today.

At around 10AM, my analysis led me to conclude that we started the formation of a first top, which if the market dynamics were to continue as they were read via my analysis, the top picked by the analysis would prove to be a top of the day. An hour later or so, the top formation was running exactly as picked up in the radar earlier.

I also analysed, in rough terms, when I would expect the bottom to take place. I should up at around 2:15PM to log to my account and I covered my shorts while posting on the forum. I also did not say anything about that as I did not want the non-good readers to have a free lunch.
I however felt that the good readers deserved to know both calls. But sometimes just one stinky fish spoils the whole room.

Well, I went short the QQQQs at 10:12AM, and covered the shorts at 2:25PM. These turned out to be the top and bottoms of the NDX and the QQQQs today June 03, 2008.

The QQQQs is one of the vehicles that follows NDX (the Nasdaq 100 Index). There are others vehicles to trade NDX including other ETFs, futures, etc. I will come back to this topic at a later article. In addition on each vehicle, you can sell calls and buy put to go short, or sell put or buy calls to go long the underlying.

Now to play the short side of the QQQQs, I sold calls. I do not wish to discuss which calls I sold today, but essentially my thinking is that if my trade does not develop as I expect it would, and if I decide to hold the trade a bit, I would also have the time running in my favor as selling calls implies selling time-value.

In the next two images, you will find a chart of the NDX during the day, and a screen shot of my trades as evidence that I traded what I stated I traded, and at the times I stated. I have covered material not needed to prove the direction and timing of the trades, as to minimize privacy issues. Forgive me if you find posting trades as inappropriate, as I agree with you. But I wanted others who may have doubts to see for themselves. I expect some people to never accept facts, as it appears to be their nature. "One can get the boy out of the country, but one cannot get the country out of the boy".

Click on images to enlarge.

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Happy trading,


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