Big Picture: DOW JONES the 9999 Red Line Support

Some of the big picture posts earlier in this blog anticipated the downward movements in the S&P because the structures were looking extremely similar to the 2008 event, in fact these structures repeat all the time in small time-frame trading.   Markets are very fractal like the larger time-frames are exactly like the small-time frames so there is no surprises at all really and can be anticipated if one studies the smaller time-frames and looks for similarities in the larger time-frame.

While nothing special can be said about the current S&P big picture chart, something very interesting is going on in the DOW Weekly.   Note the Red-line in the below DOW chart is at 9999 and there is this wide gap between the Purple and Red lines.  Purple is the top line at 18351   In structures like these, where there is this distance between the Purple and Red lines, in smaller time-frames like intra-day charts the often the price moves all the way down to the Red line.  Not every single time but more often than not.  After touching that Red line it bounces up from there is a common pattern.  Which raises the structural prospect in the larger Weekly time-frame of the DOW working itself to 9999 is very much in the cards and should not be surprising.  The other possibility is that it will move all the way back up to and beyond the purple line, dragging the Red line upwards with it eventually cannot be ruled out either but though that can happen, it is less often the case in smaller time-frames.

Thus the possibility exists, and should be taken seriously, that the DOW may travel all the way back down to the Red line which is in this case interesting value 9999   Is there an occult numerological significance to this is not clear am not a believer in such things but it is striking that the Red line is at 9999 somehow, why was it not 9958?   Why is it exactly 9999 - that's just how the chaos calculation fell out for the Red line, the Chaos Levels Indicator's algorithm computed that, it is not something placed there artificially - in fact that level was established years ago in the Weekly Chart Chaos Level computation - on precisely end of week 12/31/2004 - is remarkable that it was the last week of 2004

           

Big Picture: CL Crude Oil where will it stop falling?

Oil CL is so awesome for day trading that one often completely neglects that it is great for swing trading as well or even long term trading with large profitable moves very much in the cards.   Of course in the recent year it has fallen sharply and continues to fall.   So where might a support area be that might permit a reversal trend swing trade?  

Incorporating the remarkable Jurik JMA into the various Chaos indicators yields some great signals, to illustrate consider the following chart that provides a very early indication of the support area - that spot at $38.00 is where one should definitely cover any shorts (sell any puts) and seriously consider going long.  Sometimes price action penetrates the support by a bit and turns back up through the support, that may very well occur here but in either case that area around 38 is an excellent spot for reversal zone plays.   It could of course simply rip right through it and fall below that as well but that is less likely due to the distance between the purple line up top (which is still at $109) - rather it will likely turn around at 38 and head back up some is in the cards, enough at least to pull the purple line down from its lofty heights.    In any case the conservative course of action is not necessarily to go long there at 38 but one must definitely exit any short position once price reaches there is prudent.  And then to consider a long after that would be the swing trading plan.

Notice how extremely early the support was apparent with this indicator, it was obvious when CL was trading in the $60 range!  

On-Going Research: Meta-Systems with Customized Trading

As one observes these chaos systems especially the Tick systems, it becomes apparent that their performance curves are actually showing something about market structures.   If a performance curve of these systems is dipping, then that says something about real market states and if the performance curve is doing well then that shows something too.  

Because there is a correlation between the algorithm performance curve and market states, what if one were to try and take the performance curve itself as an input for a "meta" trading system?   In its simplest form one could literally plot a moving average lines of the performance curve and trade only when there are positive crossovers!   Or graph a channel taking trades with a system only when its performance curve is inside a channel    Technical analysis not on the market but on the performance curves of systems trading the market is the idea.  

There is actually one technical indicators vendor, Customized Trading www.customizedtrading.com  that provides Tradestation OOEL strategies to precisely this sort of technical analysis on existing system performance curves and trade them only when things are looking good    This can significantly reduce drawdowns and enhance a nice system into a really nice system

The OOEL Equity Switcher Strategy available here: http://www.customizedtrading.com/ooel/trade-equity-curve     And the process of experimenting with it to improve Chaos Tick systems is in progress.  

Possible Inaccuracy in the Minute Systems Hypotheticals?

All the Minute systems discussed in other blog posts incorporate Break-Even stops of relatively smaller tick size   There could be an issue with Tradestation back-tests on higher time-frame minute charts the "resolution" level might not be accurate enough to correctly process such lower amount break-even stops.  

This raises some troubling questions about the accuracy of the Minute systems back-testing results even though look rather outstanding they are much less impressive without the break-even stops.   This issue can be resolved by trading one or more of the Minute systems and compare the two sets of results, because even if the back-test resolution is not that great the important thing is how the Tradestation processes the system under real-trading conditions- as long as it continues to behave in the same way in the back-test, with poor resolution in real-trading all would be good.

So at some stage shall start trading the Minute systems myself in my own account regularly to settle the matter but for the time-being am knee deep in new Tick systems and Meta-systems being built on top of Underlying systems that have no real room for experimenting with the Minute systems   The underlying algorithm is the same as the tick ones but the time-frames and Tradestation inaccuracy in the minute hypotheticals is food for thought.

   

Announcing Tradestation TradingAppStore DFLAME and ESBRIGHT

Minute chart systems EMD DFLAME and ES ESBRIGHT are now available for lease in the Tradestation TradingAppStore.   These systems are very "real-world trade-worthy" from an executions standpoint.

Trade entries are market orders and therefore no such thing as 'missed trades' not a concern.  Market stops and target limit orders execute on Tradestation especially with the setting (execute at market X number of seconds if the price reaches the target).   In short these systems trade a lot like real-world trading

• https://tradestation.tradingappstore.com/products/ESBRIGHT
• https://tradestation.tradingappstore.com/products/DFLAME

Certain parameters such as profit/loss have been exposed to facilitate user fine-tuning.   Since the algorithm tends to be naturally profitable on various time-frames and chart types, there is no way for any one individual to explore all the permutations of profitability and hence makes very good sense to expose some parameters for user optimizations on different types of charts.   The default chart is the nice looking 123 minute   

DFlame Hypothetical Curve

ESBright-A Hypothetical Curve

CLBREEZE complete recovery, ESTHUNDER recovering and ESLIGHTNING struck by lightning

The chaos systems CLBREEZE, ESTHUNDER, ESLIGHTNING trade certain recurring patterns in the market; these patterns occur in cycles - with periods when they are not manifest and periods when they are manifest, over and over again.   When the relevant pattern is present the system tends to be profitable and when the underlying pattern is not present the system enters into drawdown.  

CLBREEZE recently recovered from a drawdown.   ESTHUNDER is in the process of recovering from one and ESLIGHTNING suffered a big blow last week when the ES market gapped down by 30 PTS+ it was caught on the wrong side, this can happen either on the positive or the negative direction and in this case it was caught out on the wrong side.  

Because the chaos systems track certain patterns in the markets the performance graphs of these systems actually say something about prevailing market conditions, ES looks good for trading and can be expected to make some moves based on how ESTHUNDER is recovering and looking set for some type of profitable spurt phase


CLBREEZE performance July 2015 hypothetical performance recovered from drawdown

ESTHUNDER performance July 2015 in the process of recovering from a drawdown, looking like it is setting up for a profitable spurt period coming up

ESLIGHTNING July 2015 struck down by a lightning strike of a 30 PT gap down in the ES market last week, looking like may take a while for it to recover from here

TopStepTrader Combine with Tradestation

TopStepTrader provides no direct connection from Tradestation; one solution is to send Tradestation Strategies signals into NinjaTrader is supported at TopStepTrader    Some notes on how to accomplish that are as follows because any flawed signals in trading can be catastrophic:

Ninja offers two ways of transferring trade signals from Tradestation Strategies into Ninja - using e-mail automation or using Easylanguage, directly from the Tradestation strategy code by installing a Ninja DLL into Tradestation.  The idea is to route the orders generated by Tradestations strategies through Ninja orders platform

The two methods for this sort of orders routing described here- http://www.ninjatrader.com/support/helpGuides/nt7/index.html?tradestation_integration.htm 

In reality the DLL based EasyLanguage method is difficult to properly implement and manage purely via code the various possible states that orders can be in, for instance placing a stop, canceling, revising positions, it can be complex and the Ninja DLL and associated code samples really do not suffice to build something robust enough to pass the TopStep Combine having tried it that way led to catastrophic Combine with improper, unintended trades

The E-Mail automation method is the only reasonable candidate, but with some caveats and tricky gotchas that if not properly handled would once more lead to catastrophic errors and signals mis-matches and crashing a Combine

Sending Tradestation signals into Ninja via e-mail is broadly a two step process - establishing SMTP connectivity, and then turning the Tradestation Strategy Orders display checkbox on for that particular strategy.  It is only when the orders display checkbox is turned on that a Tradestation strategy's signals start flowing into Ninja, and there are some caveats with managing it-

(1) When the signal from a Tradestation strategy order goes into Ninja and pops up in the Ninja orders list views, changing any of those values such as Stops values, or Targets values on the Ninja side manually is a recipe for disaster because then any subsequent cancelations or alterations from the Tradestation signals side will no longer match

(2) If the Tradestation strategy is already in a position when the connection is established, the position is NOT automatically matched on the Ninja side - this can be extremely problematic because a closing signal of an existing Tradestation Strategy position would actually wind up opening a new (unintended) position in the direction of the close.  For example if the Tradestation strategy was Long and sent a signal to Close the Long, that would go over to the Ninja side as a signal to open a Short!   

(3) The best case for error free operation is to establish connectivity only when there are no open positions inside the Tradestation Strategy, this can be difficult for Strategies that are always in some sort of position; in such cases one has to enter into a position inside Ninja so that it matches up with Tradestation strategy positions

Overall one must exercise caution and test it out thoroughly but it can be made to work.

TopStepTrader 50K Combine Success

Often system validation has no real third party but easily exaggerated self-attested performance is posted    The systems, indicators discussed in this blog and offered for subscriptions on futures.greeneleafe.com are distinguished in that these systems were used to pass the TopStepTrader 50K Combine and achieve a Funded trading account   More about TopStepTrader here: www.topsteptrader.com is a place where traders prove themselves to be eventually rewarded with "no-risk to the trader" funding (prop trading of a sort open to the public at large)

The recently concluded successful Combine trading record using these systems and indicators can be viewed here: www.topsteptrader.com/blog/there-is-no-such-thing-as-a-missed-opportunity-because-markets-are-not-going-away  and below screen-capture of the starting and ending balance (3K profit)   No single system was used but rather a combination of them executed in a discretionary way by selectively turning the systems on and off necessitated due to the rather stringent Combine rules.   Of course since trading is a long term game of consistent ability to bounce back from drawdowns the Combine "test" never really stops even though a Funded account has been achieved, one must continue to trade per the rules into the future is the continuing challenge and vindication of these systems discussed in this blog.  

  

S&P Big Picture: 2008 Crash Review

Everyone's aware of the financial markets crash of 2008 so how did it look under the Chaos four lines (hounds) analysis?     Reviewing that helps shed light on the current picture because in the markets everything repeats all the patterns over and over again in all time-frames sort of like waves on a beach they come on the sand and retreat over and over again.

So below chart, as early as 2007 the chaos white line crosses under the purple and constitutes a sell short signal  Again, to repeat, the need to be short signal delivered a year early AND the signal remained bearish, with white continued being below the purple all the way down, and crossed up over the purple pretty much on the dot in the bottom - in 2009.    The white line subsequently crosses below the purple again in 2010    So let's calculate the profits with this-

If traded per the Chaos four hounds signals, a S&P ES short held (and rolled over each contract period) would garner the following points:

Short 08/01/2007 ES 1340, Cover 03/12/2009 ES 570 =  770 PTS
Long 03/12/2009 ES 570, Sell 06/29/2010 ES 889 =  319 PTS

This is why it makes very good sense to pay close attention to the chaos lines cross overs in higher time-frames trading the rewards are huge, signals extremely early and precise, and while these chaos lines are computed algorithms, they are humanly easy to analyze representations of the market

So is this the holy grail for long term trading?   Not quite because though it would be profitable overall when carefully traded, it can be wrong too but in an instructive way   The problem is sometimes the cross-overs do not signal a true reversal but rather a major correction only.

The cross-over pattern suggests something like the famous Elliot Waves that everyone knows they are on to something important but leaves a bit to the imagination with voodoo wave 1, 2, 3 who knows what wave it is now?   Well perhaps the Elliot theorists are noticing these chaos lines white-purple crosses, consider the period prior to 2008 and looks like 2 fake crossovers - wave 1 and wave 2 in the Elliot Wave theory and then finally end Wave 3 is the real reversal?     Many patterns are evident in these charts not merely the white-purple lines cross over is the tip of the ice-berg really there are other lines drawn there too that reveal market structures along with the chaos levels on the main - top - portion of these images

The present picture as of 06-28-2015 looking like the end of "Wave 3" is imminent implying a S&P decline-

 











  

S&P Big Picture: Critical Time Period

Historical high areas here and the previous Big Picture post advocated trading the chaos four lines (affectionately aka 'chaos hounds'), in particular the white line - purple cross overs, very simply buy the cross-over, and reverse and sell-short the cross under.   There could be losses with the approach because each reversal can cost 20-30 points can start adding up if it "takes too many cross-overs"   But the beauty of it is that when it stops fluctuating, there would be hundreds of points moves

In the previous post the white line had crossed under around SP ES 2075, while now, at the end of the trading week it has crossed back up though not by much (see below the white - 161052 and purple - 160623) with the SP ES at 2097   One can either continue holding the Short a bit more because the white line barely over the purple or gain an early entry Long    A stop and reversal could be taken at something like 2110 the important thing is that the white remain crossed over the purple    Watch for the white crossing back down under the purple by end of Monday June 22, and if that happens there is no need to exit the current short

S&P Big Picture

At long last some significant movement in the four chaos lines indicator on the ES EMINI Daily chart - in particular the white and purple line crosses are very significant.  It crossed over (bullish) and now crossed back down (bearish) would be the latest signal (orange arrows pointing to it).  It would be excellent from here to mirror the cross-overs in trading, and so the current signal would be to go short here at 2073.   The overall picture of all indicators is bearish because the mid-line (1547) is exerting downward pressure, which gives one a great deal of confidence taking the bearish crossovers can be held comfortably   As things stand, the initial target for the short if the downward drift continues would be the 1836/7, one of the thin orange lines.  But again, if the white line crosses back over the purple the position to be reversed immediately (constitutes the stop and reversal signal)

   

Minute Charts CLFlame System burns up Oil!

Finally devoting some time exploring Chaos Algorithms on a range of minute charts and some striking systems have become apparent    One advantage of minute charts from a business "sales" perspective is that one can demonstrate longish performance histories tends to strenghten subscriber resolve in holding and trading the system through any drawdowns, because they have a longish backtest history to analyze and gain confidence from

In the past 1-18 minute charts while profitable were nowhere close to the tick charts performance and much of the research took place on tick charts that yielded striking performance in comparison.   Thus ESThunder, ESLightning, CLFlow, CLFire, in fact all of them are on tick charts

Recently started exploring a larger range of minute charts, especially the higher time-frame, 29 minute and up and was a revelation with numerous profitable systems it became a matter of cherry picking the best with literally thousands of permutations and combinations of profitablity.

These are NOT brute forced hyper optimized curve fitted systems but are rather "naturally" profitable upon application to the chart.   Then it becomes a matter of finding the best profit/stop loss value combinations   Back testing in such a situation is as simple as extending the chart time-frame backwards by a few more years and seeing the results

Out of this process arrives astonishing CLFlame trades on the 123 minute oil as close to a linear hypothetical performance curve as one can imagine charted on all available significant oil volume past history   (Beyond 8 years is too thinly traded with many gaps in the chart)

  

Introducing CLFLOW

CLFLOW trades the oil CL market in a conservative fashion and is built on two chaos indicators filtering each other in the most extraordinarily natural way with no pre-determined artificial stop-loss/profit-targets.  All exits these are determined dynamically in real-time    The system needed no optimization whatsoever and is at completely "as is" natural settings and shows the characteristic chaos systems step ladder like horizontal and vertical movement performance curve   It is not a very active system with only a handful of trades per month with lower drawdowns potential

CLFLOW : Built from the Chaos Levels and Chaos Wave indicators- notice that it trades the Chaos Wave exit and entry, Chaos Wave often provides incrediblely early entries an emerging trend

  

CLFLOW: Hypothetical Performance curve like a step ladder or inverted zig-zag shapes is typical of chaos systems, in this case completely natural not optimized in any way it just falls out that way is remarkable

Big Picture: Unchanged

Chaos indicators are universal working on all types of chart time-frames and when applied to the SP EMINI ES Futures daily chart provides big-picture insights of how the market is shaping up for the next few months   There are several indicators on the chart below but 2 discussed in this post are going to tbe mid-point fulcrum and the chaos "four hounds" indicator

The ESLIGHTNING system relies on price cross-overs of the Chaos mid-point fulcrum indicator- shown mapped on the Daily chart here the Yellow line in the middle of the chart hanging at 1543.50    Since the current price is over 2100 there is a 500 point difference between the mid-fulcrum the current price.   However the two attract each other and do not long tolerate such great distances and in fact often prices crosses over or under the fulcrum- and therefore from here the price must move down to meet the fulcrum and the fulcrum must move up as well to meet price is the only way to resolve it  

So the mid-point fulcrum relative position to current price is suggesting a drop of price to say at least 1900 is lurking in the background like a Democales sword over any upside move is going to have to fight this intrinsic downward pressure going forward.

Turning to the Chaos four hounds indicator, the positions have not significantly changed since previous big picture ES Emini post  The key is the yellow hound crossing/nearing the purple and though the yellow line is shaping in that upward direction has not yet intersected the purple.

To sum up then be very careful of any Long positions; look for Short entries with targets around 100-200 PT profit target and 30-50 PT stop-loss but be patient for some downward shaping confirmation from the Chaos Hounds indicator   Really aggressive folks can buy some SPY 200 Strike June/July PUTS right here and now are so cheap and the potenial reward ratio is quite good

ESThunder Performance Notes

ESThunder performance curve has a certain shape due to the fact that it is a play on Wing Fulcrums    Wing Fulcrums are
1) spots where big moves can happen there;
2) but sometimes these Wing Fulcrums turn into zones of pain - compression zones with weak or no trends.  But after some time the market roars out of that zone, extremely explosive.  

ESThunder in keeping the philosophy that over complication for automation is never a good thing, tries to keep things as simple as possible aggressively entering every Wing Fulcrum opportunity betting that because the market never does any one thing always but will sometimes take off from Wing Fulcrums but other times markets will simply revolve "meaninglessly" around the Fulcrum actually not that meaningless because incredible energy is being built there for subsequent explosive action

This underlying fact about Wing Fulcrums theory leads to an expected performance graph that is sort of like an inverted "Z"   Moving horizontally and then vertically; currently as of 02/26 very clearly ESThunder is an a horizontal mode - and not surprisingly one notices the market in the past week consolidating around the current Fulcrum 2107.25 - so absolutely ESThunder would be losing money here.    ESThunder performance actually sort of mirrors the underlying market conditions and just as one might expect that night follows day ESThunder will at some stage in the future move vertically with the market - because the market itself moves vertically or horizontally.   Thus ESThunder performance graph can by itself serve as a trading indicator is rather remarkable and next generation systems may try to create "meta-systems" that take guidance from whether ESThunder is making or losing money.  

For folks who want to this type of deep sychrony with the market ESThunder is a good bet but requires a bit of patience to sit through the "horizontal phase"   Anyways so goes the theory, have a great weekend folks

        

Systems Commentary for February 25th 2015 - 9:30 PM EST

Big picture ES EMINI Market - the daily chart with the powerful chaos-levels indicator and the 4-chaos-hounds lines indicator looks as below- the trajectory of motion shaping up near term up and an inevitable big down-trend around the corner around the time when the chaos-hounds white line approaches the chaos-hounds purple line (arrows illustrate) 

Zooming into Near Term Market Action

 

ESTHUNDER- is based on the Chaos Wings Fulcrum indicator    A beautiful entry right on top of the Wing level 2107, and market did not break below the Wing today, though touched it, this type of action is common with the Chaos Wings.   Also the Central Fulcrum the price action is far away from there and so there would be no chance of ESLIGHTNING fireworks today

  

ESBREEZE - Captured a couple of points yesterday, closing at session end, but took a hit today; sometimes ESBREEZE enters uncannily in the exact opposite direction of a win.  If only one could anticipate the Chaos Wave perfectly would be the holy grail (sigh)

CLBREEZE - entered with a good looking Chaos Wave pattern but exited with a few ticks loss dove-tailing with its guiding Wave termination, and it ignored subsequent major wave.  Note how extraordinarily early the Chaos Wave signals the trend is incredible, shows that the classical distinction between congestion/trend is confused because clearly major trends start well within so called congested areas