EminiForecaster Blog and Update History

Accurate Stock Market Forecasts for the Emini SP and other Futures

Archive for November, 2008

Sunday Forecast

The Eminiforecaster.com official forecast for the trading week ending
December 5th is now posted.

You may reach the forecast in the members area at either:

http://eminiforecaster.com/members/membersblog/forecaster.php

Bookmark for your convenience.

The forecast is unchanged from the tentative forecast posted Thursday. We
expect the market to continue its ascent into Tuesday and then decline from
there.

On the downside we see key levels at the 833.50 and 802 areas. To the
upside, we see 918 and 937. Please check the Emini chart for this on the
new platform, where the lines are now posted for your convenience.

A couple weeks ago, we released a new forecast that gives a bias that
should run on about the monthly time frame (based around option valuations
and expirations). At this time, the Overall Market Ranking (OMR) indication
is still bearish.

As always beware of market volatility. When the price ranges are very
high it is a form of leverage. For example, if the average daily range in
7 points, a one lot is $350 per day, when it is 70 points, it is $3500 per
day. Deleveraging during these times is prudent. Based on the $VIX index
right now, the anticipated daily range is 3.44%, or 31 points
(approximately $1,500 per contract).

We wish you the very best in the coming season in all your endeavors. All
of us who are blessed enough to be trading have much to be thankful for as
we come in to the new year.

Vadim, Rob and the EMF Staff

P.S. Please remember the name of our parent company Gtechmologies, LLC
will appear on your bill.

Thursday Forecast

The tentative forecast for the trading week ending December 5th is now
posted.

http://eminiforecaster.com/members/membersblog/forecaster.php (next week)

After a surprise bail-out of Citigroup last Sunday night that started the
rally early, and with great vigor, we have seen the market continue up
from the forecasted buy date of 11/25 PM – 11/26 AM. The current forecast
suggests we will see this bull run continue into December 2nd and then
descend from there.

Key levels are 920 on the upside and 833 and 800 on the downside.

Today (Thursday November 27th) is the US holiday of Thanksgiving, so this
update is kept short. For all our members around the world, regardless of
where you live, it is good to pause and reflect on all we have to be
thankful for. We wish each and every one of you the very best in the
coming season and beyond.

Sincerely,

Rob, Vadim and the EMF Staff

EMF Update – Platform

We hope that you had a chance to look at the new EMF platform -

http://eminiforecaster.com/members/membersblog/forecaster.php

To answer a few questions before the new videos are out please read the
following -

- The key levels from updates are drawn on the platform for the SP500 by
clicking the lines button next to cross hair button

- Daily Guidance Alerts are populated on the platform automatically via
internal popup and are accompanied by a sound

- Now that we know our current server can handle the new platform load we
can finalize the email alert opt-ins

- First quote of the date may not show till 945am

- Let us know if you had other questions

Here is an answer to an email sent today from one of the members regarding
alerts and forecasts:

Rob says: Personally-  I’d look at the forecasts but defer to the alerts
over all-  This market is too volatile to try to trade on a weekly basis.
With information like “bail-outs” being put into the mix, it makes it even
tougher to call the intermediate term.  The updates, traded on a cash basis
are up 82% so far this yearand have performed remarkbly in recent months.

Doing this is simple and powerful-  If you have any questions though- ask
me- That is what we are here for.”

All the best,

- Rob & Vadim

I love cycles.  I can’t help it.  I see them in everything around me.  Everything has a rhythm.  In fact, if things did not have inherent change, the human perceptual system is designed to ignore them.  If someone puts their hand on your arm, at first, you notice it. But then, after a few minutes, that initial sensation fades and as long as it remains, without any movement, your brain will more or less ignore it.  If it moves again, the perceptual system will pick it up and start over again.  So it is with cycles, and especially with stock market cycles!  This is because when it changes, it changes your pocketbook; a particularly sensitive perceptual system to say the least (at least for me anyway).  So I spend many hours scheming about how to quantify these things and convert them into cash.

One of the things I love the most about cycles is, they are anticipatory.  By nature, a cycle extends into the future.  This is different than any other form of market analysis, because a cycle is a projection in time.  Most people are not even capable of imagining the stock market in terms of time alone.  They are too busy dealing with the perceptual and sensory issues of price.  For me the time component is where it is at then; it is the component of analysis others ignore and it is the single biggest edge you can have in trading.

For this reason, I have correlated hundreds of cycles to the stock market that are all around us from the pulsing of electrical charges on our ionosphere (a non-linear cycle) to fixed cycles, such as a ten day (half trading month) cycle (a linear cycle).

Stock market cycle analysis becomes very complex due to other factors most people never think about.  For example, the issue having to do with missing data; the stock market is open 6.5 hours a day and is closed on weekends and holidays.  Other factors relate to market participation.  There are substantial changes in volume at various times of day.  Markets that trade over night have thin participation at night, while other times of day have certain seasonal or cyclical patterns themselves.  Volume is higher in the mornings around the open and in the afternoon around the close.  Graphically, the pulsating volume pattern looks like a suspension bridge as these cyclical volume patterns form.

A market may have multiple component cycles running at any given time.  For example, by doing cycle analysis, there may be waves that are 10, 14, 19, and 23 etc. periods in length occurring in the data (see the image below depicting these values in a Fast Fourier Transform of the S&P 500 — FFT).  When you add all these component sine waves together, it gives you a wave very similar to the market.  From there, you can use these cyclical components to project the next wave.

These time cycles may or may not give you information about the component amplitude (or variation in price).  In other words, it may give you good projections in time, but without regard to highs and lows.  Because of this, various waves may project a high or low, but it may be higher or lower than another wave. This is one of the toughest areas of cycle analysis; projecting price levels or relative amplitudes; a topic which is beyond the scope of this article.

When doing FFT analysis over time, some component waves appear over and over again when doing analysis, and others are less significant and don’t appear frequently.  The idea is to find the ones that are more or less constant and ignore the others.  There are also statistical tests you can do to try to determine if the component waves have a “significant” impact on the target wave (the traded market).   One example of this is the Chi Square test for statistical significance.

When many relevant waves line up together, you will typically find significant market turning points.  Again, this gets tricky because you are missing significant portions of real time (for example, what happens when the real wave peaks at two o’clock in the morning on a Sunday?).  This begs the question:  if there are cycles in the data (and clearly there are), then are they occurring due to external factors?  If so, does the fact that I am missing more than 80% of the data (the market is open 32.5 hours out of 168 hours in a week – 1- (32.5/168)= 81%), impact my ability to accurately discern the presence of the cycle?  Is the FFT valid at all using only 19% of the time?

This is another thing I really love about cycle analysis.  The very nature of our world and the structure of reality as we believe it to be is called into question through this science of cycles.  It actually spills over into metaphysics and even calls into question such issues as determinism and the question of free will.  I am, of course,  not intending to get too esoteric here, but when you see some of these cycles in action, their accuracy is so repetitively stunning that at times you will begin to wonder if you are staring down the face of creation itself;  that spills, of course, over into religion and all kinds of wonderful considerations about the nature of reality—Ok, enough on that!!  How’d we get from the subject of trading to the nature of reality anyway ?  :-)

There are other methods of determining the presence of cycles-  Maximum Entropy Method (MEM), Trigonometric regression, and any number of proprietary methods I have seen that are amazing.  Much work on this was done by J.M Hurst and another lesser known mathematician named Claud Cleeton, who took Hurst’s work and expanded it considerably.  I have coded all these works extensively, in addition to the works of others and have developed my own proprietary methods for cycle work.  Some of these cycle methods are so powerful, I can actually project stock market pivots for extended periods into the future.  My wife asked me, why don’t you tell anyone?   I told her, I don’t tell anyone this, simply because I know nobody would believe me. They’d say I was a quack even before they verified it because they would choose to not believe it in advance (maybe because they wouldn’t want to call their entire belief system and construct of reality into question or some other trivial issue like that).

Imagine what a world we would have if everyone was open to any idea-  would it be a better world?  Oops- there comes that esoteric stuff again…

A couple nights ago I was reviewing one of the cycles I actually computed in December of 2007 for the year of 2008. For fun, I will post the remaining projection for 2008 (today is November 21st, 2008).
Make a note of it and send me your comments in January.  Here are the anticipated turns:

Long – 2008/11/25
Short – 2008/12/02
Long – 2008/12/12
Short – 2008/12/19
Long – 2008/12/25
Short – 2008/12/30

The cycles for this projection run close to 60% accurate (meaning they are profitable) with an average trade of 12 S&P points; not bad for a year in advance!  The short side in recent months has been more reliable for obvious reasons averaging closer to 25 S&P points. It made over 600 S&P points so far in 2008- a grand whopping 76% of the current level of the index!  Either way, the statistical probability of the above historical result on the projected cycle is inconceivably low and makes a strong case for the existence of significant order in the markets that most people choose to deny without any intent of honest investigation.

Perhaps that is why cycle trading gives such an edge in trading – simply because even if you told people about the cycles they would ignore it-  The funny thing is, if the stock market is the collective financial behavior of market participants, then they choose to ignore themselves ;-)
Have some fun with it!

Sunday Forecast

The EMF official forecast for the trading week ending November 28th is now
posted. Please not the new members area and new platform. We are working
on updating training videos which should be available next week. We will
see what happens tomorrow morning and if our servers can handle the new
platform, if not we will switch back to old one temporary. Also this will
give us an idea of how to implement email alerts the right way.

We will keep the market quotes from last week there till tomorrow morning
or late tonight so you can play around with those, also date should switch
either tonight or tomorrow morning, but the forecast you are looking at is
for next week.

http://eminiforecaster.com/members/membersblog/forecaster.php

There is a minor shifting of the forecasted cycle back a bit in time, so
we are expecting the low to come a little sooner that with Thursday’s
tentative forecast. This appears to be around Tuesday PM / Wednesday AM
as the low.

As promised, here are some revised key levels: 730 on the downside and
820 on the upside with good chances of seeing 866. Remember, with the
ranges being so crazy, this is tough to predict right now.

All other aspects of Thursday’s tentative forecast remain intact, so
please refer to that in the archived “updates” section of the site in the
members area.

Please also remember this is a holiday week, so be cautious of thin
markets and the ability for the bulls (or bears) to get an easier handle
(or control) of the intraday trends than when there is full participation.
This is a fascinating topic unto itself. A lot of happy bears may be off
partying while the disgruntled bulls punish themselves by continuing to
work. This, of course, may result (if it works the way I guess) in the
self fulfilling prophesy of the bulls getting some control. The intraday
alerts should best be able to detect this. So be cautious and have a
great holiday week!

All the best,

Vadim, Rob and the EMF Staff

Gina up 188 points this week!

click play -

http://gforcetraders.com/launch.html

-

Thursday Forecast

The EminiForecaster tentative update for the trading week ending 11/28 is
now posted.

http://eminiforecaster.com/members/weekly.php (click ‘next week’)

The forecast is suggesting a continuation of the down move that was
forecasted from Wednesday November 19th into next Wednesday PM Thursday
AM area (November 26/27th).

A few pertinent facts: We closed at a new annual low today and that price
level goes back to April of 1997. If the year ends like this, the stock
market will have its worst year ever, as the S&P market is down 48.75%
year to date. Many methods of valuation could result in the S&P at the
600 level. If this is the case it equates to price levels from 11/95 and
would mean another 20% drop from here to reach that level.. Daily ranges
are huge. Today finished down 6.7% on the cash S&P index. For this
reason, trading is tough. We are living history and are in unchartered
waters (at least for most market participants). The solutions the
government are engaging in will likely have little impact, and worse, they
compete with private sector investment which is much needed for recovery.
For this reason, the declines mentioned above are likely to continue, but
be very cautious of violent relief rallies. There is plenty of historical
information to show what happens in these kinds of economic environments
in the past if you go back far enough (earlier last century and looking
back over hundreds of years ie the demise of the Roman empire). This is a
fascinating topic but it is beyond the scope of this update.

I will start including an overall market valuation starting this week that
gives insight into the better side of the market to be on. It is a
proprietary indication based on option pricing discrepancies that exist
for in-the-money stock index options that are generally traded by a more
savvy crowd than other options such as out-of the-money options. This
rating will likely evolve a bit with my research, but should be of
substantial value as I know another money manager (one of the top ranked
managers in the world ) who manages hundreds of millions of dollars based
on this indicator alone. I will include it in the updates The current
Overall Market Ranking (OMR) rating is: Bearish.

In previous updates I had repetitively warned that high volatility
forebodes downward pressure in the market. As this continues, plan on more
downside- Even in 2003, as the market began to shift back into bull mode
again, it consolidated for several months around the low before going
higher. The stock market does not like uncertainty. We have also advised
to use reduced leverage through the use of options or going to stocks such
as the SPY over futures in order to reduce exposure. With the ES futures
at 752 as it is today, it is still $37,500 worth of stock. If you are
trading that in a $5000 account and the market moves 63 points as it did
today, the change in your account is 63%.

Daily fluctuations of this size greatly reduce the chances of survival
where your trading account is small. This is true because you have double
leverage going on; one through the volatility and another through straight
leverage. These concepts are key to long term success. Following the
forecasts as written in the updates have produced $10,000 per contract
traded so far in November if the above money management criteria were
used. Did that come easily? No, it did not, but with proper management,
benefiting from those 200 S&P points was achievable. Be safe and stay in
the game!

Key levels from this level are difficult to forecast with so much
uncertainty in the market. Much of this is due to the government and their
constant changing. Here is my best shot. Upside, the 820 level is key.
Downside, the 675 level is key (half way to 600) A break of today’s low
tomorrow is quite bearish.

The intraday alerts continue to do well (almost $4000 in gains this week)
but the volatility that occurs during the day is tough. This also
supports the case for decreasing leverage and under-trading discussed
above.

We wish the very best for you in your trading and success in the coming
week.

Rob Vadim and the EMF Staff

P.S. Remember the Gtechmologies, LLC charge on your credit card is for
your EminiForecaster service. We are releasing our Gforce traders product
in 10 days. The EMF platform and alerts are in the final stages of
completion- thanks for your patience as we improve the service for you.

New EMF Platform Is Out Soon!

Coming next week – new EminiForecaster interactive platform will feature:

- 3 additional forecast symbols:
ES, YM, NQ, SPY, QQQQ, DIA

- Every symbol will have its own individual forecast

- Emini SP500 will have support and resistance lines drawn on the
platform

- Daily alerts popups and email alerts (optional)

- Improved forecasting model

- New training videos

- New members area design

- and much more

Sunday Forecast

The EMF official forecast for the trading week ending 11/21 is now posted.

http://eminiforecaster.com/members/weekly.php

There are no changes to the forecast from the tentative forecast that was
posted on Thursday. Please refer to that update if needed.

I’d like to share a bit about how market factors influence forecasting
under various conditions (if you are interested in such things, as many of
our members are). Be aware that large, fear driven intraday ranges may
decrease accuracy as well as increase risk. When the market continues to
see intraday ranges (on a percentage basis) that have not been seen in
decades different factors come into play. For example, when the size of
the bars becomes very large with respect to the longer term range, it is
equivalent to noise or static in an electronic circuit (like on a crackly
AM radio station). These same “noise” factors can impact our forecasting
making the important highs and lows hard to identify.

Another thing that can happen, is a translation, or shifting of the highs
and lows due to very emotional trading by market participants. When this
occurs, the lows may come later than the anticipated low and the highs (in
a down market) and the highs will come later and lows will come earlier in
an up market. This causes a shifting forward of cycles that under extreme
(emotional) cases can be large in both the size of the moves involved as
well as shifting forward of the waves in time.

Trading is tough in this kind of environment, particularly as your trading
time horizon is longer i.e. weekly trading. This is true because as the
time horizon increases, the above factors become more exaggerated. Keep
tight on risk management in this environment and know that this kind of
trading environment is more conducive or beneficial to short trading than
long trading. Also, another strategy is to take profits on long trades a
bit earlier and be tighter on long trade risk. Similarly, hold the
shorts a bit longer and let the risk breath a bit more.

We have lots of improvements still coming to the service but are still
conducting the final testing to make sure the new features can serve you
reliably- Thanks for your patience!

We wish you the very best in your trading this week.

Rob, Vadim and the EMF Staff

P.S. Your charges for the EMF service appear on your credit card by our
parent company Gtechmologies, LLC. Please make a note of it.

Thursday Forecast

The EMF tentative forecast for the trading week ending 11/21 is now
posted.

We see the market continuing up into Wednesday mid-day and then declining
from there.

http://eminiforecaster.com/members/weekly.php (click “next week”)

Over all, the forecast for next week appears relatively flat. With the
recent ranges though, don’t be fooled. As with today’s rally, which moved
close to 12% in a couple few hours. This suggests continued caution and
risk management.

This last week’s forecast was challenging due to a fierce downward action
early in the week with little or no retracement. This coming week is
expected to be more reliable based on the cycle stability, however, with
the big move occurring today, it could introduce some variance with
Sunday’s official forecast. We’ll just have to see what tomorrow brings.
According to the forecast now, the move should continue up though. Keep an
eye on the intraday alerts at the bottom of the platform for confirmation.

We were asked today why the alert service did not reverse to a long
position today. Quite simply, it is due to the extreme nature of the
move. The system is just not designed for 12% moves that occur a small
percentage of the time. If you look at the $VIX index (a measure of stock
index volatility), you will see it at 59.83%. This is a measure of
anticipated range in a year’s time. To convert this into a daily value,
you divide by 16. This gives you an anticipated daily range right now of
3.74%. This should theoretically occur 68% of the time (1 sigma or
standard deviation). Today’s intraday move was around 3 times “normal.”
Adjusted for time it is again several times that. As a result, the model
could not adjust to it in the time frame it occurred. This kind of what
we call, “3+ sigma event” falls into the general realm of stop losses if
you are on the wrong side of it. The stock market does not like
uncertainty (as in the current environment) and violent V bottoms can
occur as short covering forces more and more buying.

Another technical factor on this same note. The market today, after being
down 14% in the last 4 days (as of the low of today) took out the annual
low of 839 (on a cash chart). At the same time, the market was severely
underbought (see my article at http://eminiforecaster.com/blog/457.php).
At these points, the participants become fearful of being caught short
because they are out into new low territory and there is already a
shortage of new sellers. These points catalyze violent V bottoms like
what we saw today. Unfortunately the key levels failed to predict a new
low for the year altogether. We do try the best we can, but we just
didn’t foresee 14% down in 4 days.

For the coming week, we see 950 on the upside breaking that on a closing
basis would invite the 975-980 level. To the downside the only remaining
key level is 816.

Be cautious about entering long at too high a level. The higher you
enter, the less upside room there is in the cycle. Manage risk as best
you can in this tough market. Personally, I took migraine inducing risk
this week and it paid off but some positions were down scary amounts in
the process earlier today. In order to do this, as I have mentioned many
times, I do not use a lot of leverage. If your account is smaller, either
take the loss or use lower leverage in this environment where 4% days are
normal.

The new EMF platform is in its final stages of development. We are
excited to be releasing it soon!

We wish you the very best in your trading in the coming week.

Rob, Vadim and the EMF Staff