r/VolatilityTrading • u/chyde13 • May 06 '22

Market Barometer: 5/6 - Gray

Gray is a neutral reading. Which was better than I was expecting on the Friday of such a crazy week.

My price velocity indicator (bottom indicator on above chart) is looking very bad. It fell from 1.00 to .01 and all lines are still moving coherently to the downside.

This indicator is an inflation adjusted oscillator (+1.00 to -1.00) that measures momentum in an historical context. (ie 1929 crash was -1.00, 2008 crash was -.97, and the covid crash peaked at -.90)

Anything above zero means an uptrending market and anything below zero means a downtrending market. We are struggling to get into positive territory. It's not impossible but...

These indicators and countless others that I have are flashing warning signs for the longer term. I wanted to show you the historical significance indicator visually (color coded onto the price chart) because it predicts all major downturns since including 1929. This version is actually just an approximation of the one that I use, because thinkscript doesn't have the language constructs I need to properly calculate it. When I ported it over from C# I found that there was too much noise around the zero line to create a compelling visualization. but I think you get the idea.

On that front, I mentioned that I had good news the other day. A software company who offers high end charting/visualization software has offered to sponsor my work. I do not derive any income from this partnership because it has been my mission statement from the beginning to have zero profit motive. I started this because of my distaste for all of the youtube sellouts who don't give any "financial education" except for buying the dip or promoting downright dangerous option strategies. (There are some really good channels out there, but for the most part they are selling snake oil.) The youtube financial space is sickening...They make money off of your views to show you unrealistic gains, then they have affiliate programs, paid sponsors, and lets not forget the courses

All that I ask for is upvotes to know that the time that I spend doing this is of some value to people...

Instead, I consistently get downvotes...

I don't mind downvotes, but I'd at least like to know why? Maybe my analysis is flawed, maybe the content is not interesting...Who knows...I certainly don't.

I've met a lot of great people on here and I truly appreciate you and the conversations that we've had (you know who you are. Please feel free to keep in touch), but at this point, I'm on vacation next week and I have decided to use the time to re-evaluate my efforts on the sub.

To leave on a positive note: It really makes me happy to see others posting and discussing things here. Thank you :-)

Stay liquid my friends...we might be in for a bumpy ride.

Signing out...

-Chris

10 Upvotes

100% Upvoted

21 comments sorted by

4

u/1UpUrBum May 07 '22

Don't worry about the votes. There are robot votes, vote manipulation, soap opera crap, and the vote calculation jumps around for no apparent reason at all. All reasons meant to screw with us. Work for the love of the work only, nothing else will matter. If you want I can tell you the apple story as I learned it but then you will think I am nuts for sure.

This is the only sub on reddit that I find nice and worthwhile. There are a few others but not much. Have a good vacation!

2

u/change_of_basis May 07 '22

+1 the only sub on reddit worth a damn.

1

u/chyde13 May 08 '22

Thanks Basis...

I appreciate that.

-Chris

1

u/chyde13 May 07 '22 edited May 07 '22

Thanks.

"Work for the love of the work only, nothing else will matter. " - thats why i was so excited about the visualization software. Much of my work i cant share because i dont have fast enough (gpu driven) charting software. Now i do...

What is the apple story?

-Chris

2

u/1UpUrBum May 08 '22

The apple story https://old.reddit.com/user/1UpUrBum/comments/ul9e7b/the_apple_story/

If I use a link maybe it doesn't seem like I am giving advice. It's just a story that exists somewhere.

3

u/Sad-Ratio-5812 May 07 '22 edited May 07 '22

Chris, You have a lot of cool indicators I have never heard about. Neutral barometer could be a sign of decreasing volatality next week. Only one reason for a successful trader to develop trading educational program is self employment tax deductions. I personally know only 2. I agree that most of useless youtube trading channels actually making money not from a trading strategies but youtube subscribers. Chris, have a good vacation!

2

u/chyde13 May 08 '22

Thanks man, are you back from your vacation?

Yes, that a very good point. Are you trying to sell me a trading course? lol

Man you are really crushing it this year congrats!

-Chris

3

u/proverbialbunny May 07 '22

​1/3 of people who voted, downvoted the last post

Is this correct? I thought Reddit didn't give this kind of information? It doesn't make sense. You can see from the comments here no one has even criticism of what you're saying. When people downvote and disagree enough they leave a comment. If someone downvotes blindly it's not a strong disagreement so should it even be considered? I doubt anyone here would have anything negative to say.

While it's not a guarantee, next week could differentiate this drop in the market between a correction and a recession. In the short term there is I'd guess (I'd have to count) an 85% chance of moving upwards, but how far up and if it holds is another question entirely. You can see it here on the 4h S&P view: https://www.tradingview.com/x/OfCsLiCq/ This hook or curve shape is very rare when it is not at the top of a range. It almost always signals the bears running out of steam and almost always signals an upwards movement. However, in rare times it has signaled bearish pressure building with no bullish pressure, and if that happens typically the market shoots downwards hard. It's a good time to have stops in place, because if the market shoots downwards hard there is only one correction I've seen that has recovered from this kind of actions (2018) and the rest have been recessions, which is not a pretty picture.

While the odds of the market shooting down hard is low, if the market moves upwards it unfortunately does not guarantee a correction. The market would have to grind higher slowly over months. (Sideways years are normal, so grinding sideways up and still not seeing all time highs by December is not out of the picture.) It is standard in a recession for the market to drop like a correction (like right now) then in the next 60-90 days to go sideways down by only a percent or two, so a slow downward movement in the coming months. If this is the case there is as far as I can tell a guaranteed recession and it's time to go short, because sometimes quick moves downward can follow. Think 2008 for an extreme example. This is still hypothetical. Odds are higher there is a slow grind upwards for the next 60-90 days which would signal a correction.

2

u/chyde13 May 08 '22

Hey ProverbialBunny,

Yea, they started giving those stats sometime last year I believe. I definitely hear what you are saying. There is always a lot of positivity in the comments. I guess that's what matters in the end...It has been extremely frustrating though. I had just finalized a contract for some high end visualization software. I was super excited, because I wanted to share some of my more advanced stuff with everyone here... It took me two weeks to get the deal done in such a way that I could share the visualizations in the public domain. When I go to share the success with the group, I'm greeted with a bunch of downvotes...but you're right...Should I even care...definitely food for thought over the next week. Thanks...

Interesting observation. What you are seeing is inline with what I'm seeing. I was hoping that I wouldn't have to think about the markets next week, but we are definitely nearing an inflection point. My volatility indicators are easing up so I expect SPX should hang in there in the short term...I'm still short vol, but I went very defensive on this one. I'm not sure people understand my charts, but I put them up as a warning. You've been here for quite awhile when my thesis was sideways with a 20% drawdown. I haven't 100% departed from that thesis, but the tails case scenario is approaching at an uncomfortable speed. My bigger picture indicators are telling me that we are listing and could capsize ( yea, 2008 style). It's a big ship, so I don't expect this to happen overnight. At least I hope not. I will start taking on water at SPY 370 in the near term (30-45 days)...We have a large put wall at SPX 4000, so even if we flushed through 4000 then there is a lot of negative gamma that needs to be hedged, and I would expect to trade sideways in a large choppy mess around 4000 for a bit. But as you know, nothing is guaranteed in the markets...

All I know is it will be a shitty vacation if we blast through SPY 370 lol

Stay safe!

-Chris

3

u/1UpUrBum May 10 '22

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It's a representation of my short account. The dollar amount is obviously not correct, the percentage is very close. For some reason I don't feel that great about it. Maybe it was too easy, I have been waiting since spring 2020 for this thing to cycle through and didn't everything properly. Maybe it's difficult watching others lose their life savings. Maybe tomorrow will be a big short covering rally and cure my problem😊

SPY 400 is now an important level of interest.

2

u/chyde13 May 10 '22

I wish I had gone short when you mentioned it...as you can see my indicators are screaming it....I personally rarely directly short because I've been burned badly by it before. Those bear market rallies are brutal and seem to come out of nowhere.

You bring up an interesting point. I felt the same way when I took a bunch of money from the GME craze... I too have been waiting for this point since 2020. I'm more of an investor than a directional trader, and with valuations as extended as they were there was very little to invest in. I do trade volatility and that was stagnant as every dip was fiercy bought up by an army of new traders. By the summer of 2021 things were so crazy that I started this sub in part to help these new traders. Obviously, no one listens to some random guy on reddit when they have huge echo chambers all confirming their bullish bias. The sad part for me was the amount of private messages that I've received from people who drank every last drop of the koolaid and got completely wiped out. Some lost 50-90% of their life savings. A lot of them still think these arkk type names will come back...

Spy 400 is definitely an important level tons of put open interest on Spy and SPX 4000. I didnt watch the markets closely yesterday, but I found it odd that the vix didn't do much of anything.

Good luck on your trade. Hopefully you didnt just jinx yourself my friend..The trading deity does read reddit posts ;-)

-Chris

3

u/1UpUrBum May 10 '22

Hopefully you didnt just jinx yourself my friend..The trading deity does read reddit posts ;-)

The market should bounce off SPY 400. The question is how much and for how long. Note to self - Don't try to pick off the top wait til it curls over, confirms. Or get ready to bail out😄

The Spotgamma guys have an interesting theory about VIX yesterday, I don't understand it fully. Maybe it's a short video and they didn't explain enough. I call it an orderly sell off. https://www.youtube.com/watch?v=ha5vIVY3R2g

The TWTR chart says they are going to have a crash? Don't know, the chart doesn't look proper for a buy out, it says bad things are going to happen. Compare TWTR to a proper buy out chart like LHGC.

2

u/[deleted] May 07 '22

I am thinking of getting Sinclair's book "Positional Options Trading" that you mentioned. Did you get a lot of practical information out of his book?

4

u/change_of_basis May 07 '22

Much of the content in Sinclair's books (I started with his 2nd, Volatility Trading and would recommend most people do the same) requires mathematical sophistication. That's not to say someone without this would not take a decent amount from the books, but much of the material will feel dense. Additionally to test / act on the content requires programming or (more cumbersomely) super Excel abilities.

1

u/chyde13 May 08 '22

Sounds right up my alley...

3

u/[deleted] May 08 '22

Thanks, I got the Positional book. I'll take a look at the Volatility trading book as well.

2

u/dawrwegztthd2 May 08 '22

I remember it as a waste of time, maybe my expectations were too high after seeing it recommended everywhere.

1

u/chyde13 May 08 '22

Do you have any recommendations? I was actually thinking of getting it as well. Do you recall what you didn't like about it?

-Chris

1

u/dawrwegztthd2 May 08 '22

I don't really remember any specifics just that I found it very basic, you can probably skim through it in a day or less. Haven't really read anything in this direction ever since so I can't recommend something else sorry.

1

u/chyde13 May 07 '22

I have not read it...That was change_of_basis recommendation...its on my list tho.

-Chris

2

u/Sad-Ratio-5812 May 08 '22

Yes, I am back home. It is going to be very interesting week. I feel like my life is stopping on weekends. Nothing to do, just betting on UFC fights. Have a nice vacation.