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QAT Systems, LLC

Why Math?

“All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope – that is why the numerical formations and patterns recur on a constant basis.” – Jesse Livermore


I wondered if Jesse Livermore believed that the patterns were numerical, why weren’t we using math to define them?

Why weren’t we using math to solve the problem?

The analysis used by most people typically uses derivatives of what really matters, price. As price is the final arbiter. Traditional analysis does not always represent what actually happened. Creating something that was purely mathematical, would have to be more beneficial. Because something that actually happened would have to be more useful than something that may not have happened at all.

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QAT Systems, LLC

ETF Week in Review

In a holiday shortened trading week, we witnessed more intra-day volatility as a result of the situation in the Ukraine.

SPY

On Tuesday, the SPY made a ‘Fast Move’ to the ML1 level. This fast move failed and the SPY then became an intra-day reversal. On Wednesday, the SPY continued it’s downward move, reaching the MS1 and following through reaching the MS3 by the end of the trading session. On Thursday, the SPY gaps down on the Open. Keep in mind that a Gap Open is to be considered a ‘Fast Move.’ It seems as though a Fast Move may be a tradeable move in such instances. This is because we know that the market is likely to attempt to test the Low and Close from Wednesday. Friday, the SPY gapped up on the Open, tested the High and Low from Thursday rather quickly. And continued higher for most of the day.

DIA

Tuesday the DIA gapped down on the Open and traded in a tight range. Wednesday the DIA reached the MS1 level down shortly after 10 AM. It continued lower much of the day and reached the MS3 level down just before the close. Thursday, the DIA gapped down on the Open. The DIA traded in a tight range until late in the day. It began trading higher and reached the ML1 Level and tested Wednesday’s low. Friday, the DIA gapped Up slightly, but never tested Thursday’s High.

QQQ

Tuesday, the QQQ gapped down slightly and made a ‘Fast Move’ back to test Friday’s Low and Close. Wednesday, the QQQ met the MS1 Level down shortly after 10 AM. It continued lower throughout the day and reached the MS3 level before the close. Thursday, the QQQ gapped down on the Open. Remember a large gap opening should be considered as a ‘Fast Move.’ In a gap opening, you should consider the distance needed to travel to reach the previous day’s price action. Something else to consider when studying gaps: How the market closed in the previous session.

Lessons for the Week: ‘Fast Moves’ have a tendency to come from ‘False Moves.’ Gaps on the Open are ‘Fast Moves.’ Pay attention to the distance the market needs to move. How far does the market need to to travel? This question will help you determine if a test is likely.

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QAT Systems, LLC

ETF Week in Review

The ETFs reached the Intra-Day Momentum Levels several times this week. The levels are presented in the graphs with explanations of market action.

SPY

The SPY reached the MS1 in a fast move down on Monday and closed below the Open. On Tuesday after a Gap Up on the Open, the SPY traded in a narrow range and did not fill in the gap from Monday’s price action. Wednesday the SPY failed once again to close the Gap from Monday-Tuesday. It later rallied to the ML1 around 2 PM in a ‘Fast Move.’ On Thursday the SPY reached the MS1 (440.16) shortly after 10 AM and pulled back off the low. Later in the afternoon, the SPY reached the MS2 (437.10) and closed below that level. On Friday, the SPY reached the MS1 (433.52) Level down just before noon. I rallied back to the Open and closed below the Open and above the MS1 level.

Fast Moves Intra-Day

One of the more challenging obstacles is identifying the ‘Fast Move’ that occurs over multiple bars in data normalized by time. Such as the ‘Fast Move’ to the MS1 level on Monday afternoon in the SPY.

QQQ

The QQQ traded in a narrow range on Monday and Tuesday. The QQQ gapped up on the Open on Tuesday and did not fill the gap in intra-day trading. On Wednesday, the QQQ reached theMS1 (351.05) down in a Fast Move at the open. Later in the day, after testing the MS1, it made a Fast move to the ML1 (356.79). On Thursday, the QQQ reached the MS1 down (349.45). Pulled back and continued lower to the MS2 (346.24) and closed below that level. On Friday, the QQQ reached the MS1 level down (342.84), continued lower without much of a pullback. After it reached the MS2 (339.27) around 1 PM and rallied back to above the MS1, but closed below that level.

DIA

On Monday, the DIA reached the MS1 (343.88), pulled back off the lows to test the Open and the High of the Day. The DIA later tested the MS1 and closed below the Open and above the MS1 level. Tuesday, after a Gap Up on the Open, it did not fill the gap from Monday-Tuesday. On Wednesday the DIA reached the MS1 level in a test of Monday’s High before a rally to the ML1 level. Thursday, the DIA reached the MS1 (354.42) in a Fast Move, in the first 30 minutes of trading. The DIA reached the MS2 (343.41) level, in late trading and closed below the MS1 level, above the MS2 level. Friday, the DIA gapped down on the open and quickly tested Thursday’s high and close.

Lessons for the Week

Lessons for the week: 1. Fast Moves intra-day are more challenging to identify, than those that occur at the Open. 2. Pay attention to how far a market moves against a directional move or level. You will notice, that the strongest and weakest markets do not tend to have deep pullbacks.

Method to the Madness

In his book, The Logical Trader, Mark Fisher pointed out a few very important aspects of the markets worth noting. Fisher pointed out that a move to one of the ACD levels that occurred rapidly, did not generate a signal. He stated that if a trader had an Opening Range of 5 minutes, then the market must trade at the A Level for at least 1/2 of the time of the opening range. In this case, the market would have to trade at the level for 2.5 minutes. The concept of the ‘Fast Move’ certainly gives an enormous amount of credibility to that idea.

Fisher also indicated that market-based instruments were more challenging to trade because of their tendency to ‘back-and-fill.’ I interpret this to indicate that he feels as though they may not ‘trend’ all that well. This is also the reason I am demonstrating The Intra-Day Momentum Level by applying it to market-based ETFs.

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Fast Moves IDMM-ETFs

Fast Moves in the QQQ, DIA, and SPY

Fast Moves often come from False Moves.

The QQQ reached the MS3 level @ 364.55 down in the first hour of trading.

The DIA reached the MS2 Level down @ 352.80 in the first hour of trading.

The SPY reached the MS1 Level down @ 443.43 in the first 30 minutes of trading.

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ETF - IDMM HP RT ETF-Results IDMM-ETFs The Intra-Day Momentum Method - ETFs

Results for 6-10-21

All three market-based ETFs had ‘Fast Moves’ off the Open. The SPY and DIA resulted in Intra-Day Reversals. The QQQ managed to extend to the ML2 Level and after a rather deep pullback returned to that level.

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ETF - IDMM HP RT

SPY, DIA, QQQ Reach MS3 Level in Early Trading

After gapping down on the Open, the SPY, DIA, and QQQ all three met the MS3 Level down before noon today.

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QAT Systems, LLC

SPY reaches MS1

In a ‘Fast Move’ which occurred shortly after the Open, the SPY reached the MS1 Level down at 380.35. The Intra-Day Fast Moves, which occur at times other than ‘off the Open’ can be considerably more difficult to recognize, as they can occur over multiple bars in ‘time-frame based analysis.’ The SPY went from above the Open to below the MS1 level in less than 30 minutes. The further a market moves in a short period of time, the more overbought/oversold the market would have become. The Upside Limit in the SPY is 383.24. The question to answer is ‘Do you fade or trade the Fast Move?’ It appears that ‘Fast Moves’ tend to pull back and possibly reverse more frequently than a slower move to the levels. Fast moves are likely to indicate that if you want to take the ‘directional trade’, you should wait for a reasonable pullback or a definable pattern such as a ‘Double Top’ or ‘Double Bottom’. Understanding that if the market reaches the Upside Limit, the likelihood of a close below the MS1 would be diminished. According to ‘The Logical Trader’ by Mark Fisher, market-based ETFs, such as the SPY, DIA, and QQQ have a tendency to ‘back and fill’. For this reason, when demonstrating The Intra-Day Momentum Method on these instruments, I typically use the method to define patterns such as Double-Bottoms, Double-Tops, and Pullbacks.

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ETF - IDMM HP RT QAT Systems, LLC

SPY and DIA reach MS1 Level

The SPY and DIA both reached the MS1 Levels down in the first 30 minutes of trading. The most dangerous moves for the directional trade are ‘Fast Moves’. Fast is defined as reaching any level defined by The Intra-Day Momentum Method in 30 minutes. In other words, a market that moves a specified distance in price over a defined period of time.

The SPY MS1 is 371.16, with an Upside Limit of 375.00 .

The DIA MS1 is 300.38, with an Upside Limit of 303.23.

If a market reaches the Upside Limit, the likelihood of a close below the MS1 diminishes.

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ETF - IDMM HP RT QAT Systems, LLC

SPY, DIA, and QQQ reach ML1

The SPY and DIA both reached the ML1 level in the first 15 minutes of trading. The QQQ was a little slower to react, reaching the ML1 around 10:45 AM. Fast Moves often come from ‘False Moves’. Was yesterday’s ‘Fast Move’ down a ‘False Move’? Only time will tell, the strongest markets do not tend to pull back all that much.

The ML1 in the SPY is 378.81. The Downside Limit is 375.13.

The ML1 in the DIA is 306.51. The Downside Limit is 304.21

The ML1 in the QQQ is 323.33.

The question to seek an answer to might be: Does yesterday’s ‘Fast Move’ down, justify today’s fast move in the opposite direction?

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ETF - IDMM HP RT QAT Systems, LLC

SPY reaches MS3 in early Trading

The SPY reached the MS3 Level down at 380.19 by 11 AM Monday morning. This was a relatively ‘Fast Move’. Fast Moves often come from ‘False Moves’.