EminiForecaster Blog and Update History

Accurate Stock Market Forecasts for the Emini SP and other Futures

Archive for December, 2008

Sunday Forecast

The official EMF Forecast for the trading week ending Jan 2, 2009 is now
posted.

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

Per the forecast, we expect the market to decline into mid-week then rise
from there.

We expect the markets to remain thin, and with the market schedule having
the market closed a good deal, market action that would otherwise occur,
will be missed.

Due to the sparse nature of the market at this time, we will also keep the
commentary to a minimum.

Key levels are 894 and 902 on the upside and 853 and 846 on the downside.

Then OMR continues to be short biased, so short trades should continue to
be more likely to be profitable.

As always, manage your risk according to what your account size and
prudence would dictate.

We wish you the very best in the coming new year!

All the best,

Vadim, Rob & the EMF staff

Thursday Forecast

The EminiForecaster Tentative Forecast for the trading week ending Jan 2,
2009 is now posted.

http://eminiforecaster.com/members/membersblog/forecaster.php (click Next
Week)

We expect a decline into mid next week and then up from there.

Due to the very sparse nature of the current holiday markets, we will do a
more complete forecast as we have more data on Sunday.

Please also remember that in these markets, the shorter term intraday
alerts can be used as a stand alone model, and to to confirm entries for
the forecasts.

We wish you all the very best in your trading now, and in the coming
year!

All the Best,

Rob, Vadim and the EMF Staff

Sunday Forecast

The EminiForecaster.com official forecast for the trading week ending December 26th is now posted.

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

There are no changes to the forecast from Thursday’s tentative forecast.

You can see the holiday trading  schedule here: http://www.cmegroup.com/tools-information/holiday-calendar/

The market will likely be fairly thin this week as many traders are traveling for the holiday.

We would like to take this opportunity to thank you for your support this year and to wish you continued success in the coming new year!

Rob, Vadim and the EMF staff

Thursday Forecast

The EminiForecaster tentative forecast for the trading week ending December
26, 2008 is now posted.

We expect the market to be up next week per the tentative forecast.

http://eminiforecaster.com/members/membersblog/forecaster.php (click Next
Week)

Next week is a holiday week. The forecast posting ignores when the market
is closed, so please omit these periods. As is often the case with
holiday markets, the participants on the winning side may leave the market
to the losers for a few days, only to come back and regain their strength.
Because of this good trends can get going on these days of lower volume and
lower overall participation.

Also be very cautious of a sudden (continued) government intervention in
this market.

Our OMR is still bearish and is not decreasing in its position. In fact,
it appears it may be increasing a bit. As a result, short trading is
likely a better proposition than long trading in general at this time.

Our mid week retracement managed to get pushed higher than the forecast
due to the Fed action this week and touched our forecasted high for the
week.

This 918 level remains a key level. If we manage to get through this,
particularly on a closing basis, the 950 area could be a possibility.

To the downside 856 is key along with 846 below this.

We would like to thank you all for making us one of the very top ranked
trading websites on the internet.

We wish you all the very best in your trading during this holiday season.

All the best,

Rob, Vadim and the EMF Staff

Sunday Forecast

The EMF official forecast for the trading week ending December 19th is now
posted.

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

There are no changes to the forecast from Thursday’s tentative forecast.
Please refer to Thursday’s update for all appropriate information.

A discussion with a fellow money manager this weekend who runs a
multimanager fund dwelled on the topic of how can you model “government
intervention” as we are seeing it in this market.  The fact is, you
cannot.  Let’s take this last week for example.  On Thursday mid-day, we
had the Senate turning down an auto “bail-out.”   They wanted the UAW
to kick in to make pay benefits similar to Detroit’s foreign
competition.  Of course, a concession like this would be months in
negotiation (or longer or never) with the UAW.

In the meantime, the automakers will not be able to make payroll in the
very near future. Translation: The auto industry is history.  Thus, a
gigantic sell-off.  Then, over night were words of not allowing the auto
industry in the US to fail and this resulted in a big rally back up into
the midpoint of Thursday’s range.  This induced a 6% change in price of
the S&P500 inside our cycle.  This kind of randomly placed interaction
with the market is impossible to model in terms of cycles or any other
technical method and, it wreaks havoc on computer programs designed to
predict such things.  It has long been said, “the stock market does not
like uncertainty.”  We have not seen more uncertainty in the lifetimes
of most market participants.  Knowing what is going on in the political
and economic environment is a vital part of success in these markets.  In
an environment of uncertainty, shorts tend to prevail.  Also keep in mind,
there will be (are) more government/Fed manipulations in the mix (likely
very abrupt ones).

For this reason, we have continued to stress the use of the intraday
alerts on the EMF platform. This can be accessed by pressing the
exclamation mark on the platform. Is trading the alerts all gravy? No,
last week, for example, the alerts traded without any sophisticated rules,
returned about $1500, but this was achieved with a good amount of risk.  As
a result, I wrote the following FAQ this week to help traders make much
more out of it than we are reporting. Please make a note of the
following:

The stats we use in the updates for the alert service are just based on
entering at or near a 40 minute high (short) or low (long).  It is a
simple approach.  The alerts as is the case with all EMF product, its a
tool.  You could also do well fading previous day’s hi/lows in the
direction of the alert.  For example, know the globex high/low, the
previous day’s hi/lo and the zone around both 15 minute and 60 minutes
range after the 930AM (eastern time open).  Today was a great example
(12/11/08).  The globex high was 899.50 at the time of the alert; 25
points of gain on the short trade if closed at the close of the day.
Yesterday at 10:30 it triggered a long alert (12/10/08). You could have
bought at the globex low of 888.50 and held to the close for 18 points of
gain.  To be honest, we did not claim this kind of gain and report a much
more conservative level, but it certainly was attainable using these
methods.  This method of choosing support and resistance levels is
incredible and is used by some of the very best traders.  Breaking out of
these ranges by mid-morning/mid day often results in trends. By trading at
the opposite sides of these ranges (with respect to your trade direction),
you can reduce risk and increase reward by large margins.

By trading simply by using entries at 14 period moving average of the
highs (to sell) or lows (to buy) after the alert, the alert service is up
$13,000 per S&P Emini contract traded with an average trade of $438.00.
These are results that have occurred based on the simple rules I presented
in the training when we released the alerts many months ago.  By using the
above techniques from the previous paragraph, substantial improvements to
this basic tool could be made.  Depending on your personality, account
size and other factors, it may be very important to adapt these methods
slightly to your own trading style for a variety of reasons that will
contribute to your success.  The comments in the paragraph above are
intended to help you with this.

The OMR remains  Bearish.  Shorts are likely better than longs.

We wish you the very best in your trading in the coming week.  As always,
manage your risk consistent with your account size. Please also remember
each S&P Emini contract is about $44,000 worth of stock at this time and
that average anticipated daily ranges in this environment are
approximately 3.5% ($1540 per contract).

Rob, Vadim and the EMF Staff

Thursday Forecast

The EminiForecaster.com tentative forecast for the trading week ending December 19th is now posted.

http://eminiforecaster.com/members/membersblog/forecaster.php (click Next Week)

We expect the market to decline next week into Friday (early to mid day) and then go up from there.

The current forecast was doing quite well into today, but took a hit after the Senate resisted on a bailout of the auto industry.  We do still have the forecast as up into tomorrow. It is also possible the turn is coming early since the overall market condition is bearish. Expect upside positions to bring less benefit and more risk in bearish environments.

The Overall Market Rating (OMR) remains bearish.

The intraday alerts are performing exceptionally and we will again draw your attention to the fact this is the most important tool on this service at this time (though many readers have ignored this based on many of the emails we get—more on this below).  The reasons have been explained quite a few times in previous updates.  The alerts are up about $2500 for the week as of today.  Email alerts for this service are in their final stages of testing.  We will add this feature as soon as we know it can reliably be done for your benefit.

Let’s talk for a moment about beliefs in trading because I see this over and over.  Many traders decide they “believe” in some form of analysis.  This is typically the case without the extreme analysis I might (personally as Rob speaking) bring to such a thing, in order to intentionally disprove it.  Instead, they handle it as though it were a matter of faith.  This manifests in the form of statements such as, “Time is more important than price” or “ I only work with Fibonacci retracements” or “I trade candlesticks”  etc, etc. etc.  After losing $140,000 trading, I decided I would not lose any more.  I can tell you faith and trading, if related at all, will not relate when you choose for them to.  When they do decide to relate, you will know it, I promise.  I can say this because I have experienced it.  Something very few can claim.

After losing that $140,000, I abandoned all measures of faith and began extreme analysis of facts using the tools I learned in school.  I continue to do this using statistics and experimental design based on solid scientific principles.  It is hard enough as it is to win trading without some measure of known risk and reward parameters.  This is why I use my 18 years of stock market research knowledge to build models for our clients that work.  I am not just a system developer, but a trader too; and I have traded my systems as long as I have been doing this.  I have made and lost money, but I have made vastly more than I ever lost, and  I share these experiences with you through these updates.

If I tell you something is likely to work right now over another method, there is a very solid reason I do this.  I do not ever stick my neck out unless probabilities are in my favor.  This is true whether it be based on a trading system design itself, or its implementation.  Ignore me if you will, I am trying to help you because you have enlisted my services to do so; and I take that honor very seriously.  Some may “believe” various things are attainable trading that are unrealistic.  I say 98% of them fail because of those beliefs.

As always, be prudent with money management and risk exposure.   Quite simply, you cannot win if you are not in the game.

Key levels for the coming week are currently at 905 and 918 to the upside.  To the downside 850 is key, along with 816.

We wish you the very best in your trading.

Rob, Vadim and the EMF Staff

Your broker may not have decided to tell you, if you are a short term frequent trader, how commissions affect your account.  You probably won’t see articles put out by the industry either.  One of the most popular sites on the internet that has over 20,000 visits (and over 200,000 page views per day) provides the following statistics based on averages reported by their trader/subscribers:

We can see from the table above that a large percentage of these traders are making more than 6 trades per day, or better than 120 trades per month.  This is a rough guess, of course, but we can get an idea from this, what is going on out there in general; the brokers are making a killing.

Let’s analyze the effect of a hypothetical trader, Tom,  who has a commission rate of $6 per round turn, trades 6 times per day and see what kinds of forces influence his bottom line.

When you take a position in the market, whether you know it or not, you are spending a minimum of one tick in the bid-ask spread.  On the Emini contracts, this equates to $12.50.  When you exit the position, you pay the same minimum $12.50 plus $6.00 commission.  This total minimum expense comes to $31.00 per round turn and assumes no other slippage (which could actually be unreasonable but we’ll let that slide for now).  Now Tom is young, strong, educated, smart and motivated to succeed in his new-found career of trading the Eminis.  He is living the dream, so no problem, right?

But, let’s take a look at it from a little bigger perspective. Tom is devoting $3720.00 per month to expenses in terms of the Emini market.  The fact is, from the website statistics above, that 63% of the respondents traded more than 6 trades per day.  Imagine how much successful trading Tom has to do to recapture his $3750.00 each month, not to mention the risk it has added to his account…

If Tom is trading a $5000.00 account like many of the people I talk to on a daily basis, he is spending 74% of his account monthly in trading expenses. Tom may be having a heck of a good time, but there is a good chance he will not be trading in the very near future.  That is because his account exposure is much too high to sustain successfully for any length of time.  This is especially true when you consider that Tom many not be a better than break even trader.

The fact is, for Tom to be successful with this level of trading he should either have a much larger account for this amount of trading, or he should be trading a lot less or both.  Living your dream is a wonderful thing.  If everyone in the world truly did this, the world would be an incredible place.  Don’t forget to quantify the implicit things in the process of it all that can keep you from succeeding.

Sunday Forecast

The official EminiForecaster forecast for the trading week ending December 12th is now posted.

There are no changes to the forecast as posted from Thursday night.  We expect the ascent through next week to continue.

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

As always, use prudence with your exposure in these volatile markets.  I answered quite a few emails Friday addressing the exact same issues I brought up in the Thursday update.  It amazes me how traders will expand their risk exposure to obscene levels and then not be able to handle the parameters they set for themselves.

This issue results in our largest attrition rate over any other because people literally lose their accounts over some very avoidable situations.  I have been in this business for many years and have seen it all, but it is always the same story over and over.  No matter how much I remind, train or inform people, they still do it.

The money management you apply is independent from any trading method.  You could perform quite well in time with an inferior trading model if your money management was right.  Each client’s specific needs are different. Therefore, I cannot help you with your specific case as part of the service, because we are not specifically licensed to advise you in this capacity.  You have chosen to do your own money management for whatever reason and this is probably good, since most money managers are not necessarily competent at it anyway.

A very big money manager kept sending me very expensive promotional material.  I got tired of seeing it because it was saying all the wrong things and avoided the questions one should ask in order to intelligently invest.  I contacted them in writing and asked them to give me their performance numbers for an account my size.  They not only did not respond but, they also stopped sending the promotional materials.  This really says it all!  You have likely seen this firm’s ads.  They spend millions on advertising.

Marketing always wins over technology.  You can quote me on that (and that includes the marketing you do to yourself).  Our EMF update/Alerts are up somewhere around $24,000 in the last couple months per Emini contract traded (why two months?  Because that is how much data happened to be on my screen).  What return is that?  It depends on your money management!  It could be a blown out account, 25% or 100%.  The choice is yours.  That $24,000 did not come without risk.  So managing that risk is critical to success. If I traded that on a $100,000 account, it is 24% in 2 months- WOW.  The market itself lost 24% during that same time.  That is a 48 % benefit in two months by way under trading!

As for me, I would not over trade it; I can get good enough returns by not even getting greedy in crazy markets like these.

We wish you the very best in your trading in the coming week and coming into the new year.

All the best,

Rob, Vadim and staff.

Thursday Forecast

The tentative EMF forecast for the trading week ending 12/12 is now posted.

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

We expect the market to cycle up in the coming week.

Keep an eye on the alerts as they continue to outperform in this market environment (about $1800 week to date with no money management).  If the volatility calms down, that might change, but for now, alerts are king; especially if combined with prudent money management-

Fighting an immutable statistical law is risky. I have made my mutual fund clients good money this year largely by NOT trading and picking my spots.  Now that is unrelated to EMF in some respect even though I use the forecasts for timing, but the principle is the same:  Manage risk-  Many things work against you statistically when you don’t that you may not even be aware of.  Here is a article on the subject from the EMF training:

http://eminiforecaster.com/members/TradingRiskManagementSimulations.pdf

Option pricing still suggests bearish price action in the intermediate term, though we may appear to be forming a base here that might get some upside into year end. These opposing factors suggest volatility will continue to rule.  The Overall Market Rating (OMR) is bearish.

Key levels are 915 and 940 on the upside and  813 on the downside.  Obviously a break at this level is bearish.

Continue to beware of sudden changes in sentiment.  We are seeing abrupt changes in from close to open.  An example of this was 11/28 to 12/1.  It occurred again on 12/01-12/02 and again on 12/03-12/04 etc.   Today (Thursday 12/04) was a little better but, this pattern of close to zero price persistency, combined with big ranges induces a lot of fear because you cannot rely on the present to know the future as much as during normal times.

One example of why this is important is found in the weather.  If you are to predict tomorrow’s weather, the best estimate is it will be similar to today’s weather. Ok, yes, I live in San Diego, but San Diego is this way for a good reason: stabilizing ocean temperatures (equate this stabilizing feature to a properly functioning US Congress).  It doesn’t generally go from hot to cold then hot and cold over and over again.  If it did, it would wreak havoc on all kinds of things and it will with the financial environment as well.  If it is weather we are referring to, we might keep different clothing available during the day to protect ourselves.  In the financial markets, we must also protect ourselves too and this is through money management.  I have talked about money management a lot in these updates and hope you will benefit from it.  If you have questions, ask.

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

All the Best,

Rob, Vadim and the EMF Staff