The Buffett Indicator

[ME]

I tried something and found frequencies of: 39, 61, 26, 14, 10, and 5 days. (Do these make sense?)
Extrapolated it gives me the blue line.
I wouldn't bet on this. I just put it here for my own curiosity to see if this will make sense in hindsight.
Who knows if this could become a new hobby... or rather not.

[eccentrically1]

Did you find those daily intervals from the rally up?
It makes sense definitely. Everything moves in cycles. There is a market direction theory based on Fibonacci numbers.

[ME]

They fell out of a crude wave matching algorithm. Most likely 14 is two weeks and 61 is two months. The rest could be a smoothing requirement because market fluctuations do not go along ideal Sine waves... But who knows if those ring some familiar bell.

[WaltzCee]

I don't know if they make sense or not. And I am familiar with Fibonacci series. Some think
they are more of a self-fulfilling prophecy. When major traders use those levels as
resistance and support they come in at those points and begin to make the market. I've
never used them.

If you go to stock charts dot-com and select annotate on the left side right below the chart
there are interesting options you can use.

I'm not sure how it is in your neck of the woods but here you can open up a brokerage
account and then have what is known as a paper account. You can fund at any amount you
want 25 thousand a hundred thousand Etc. And then you can make trades and it will keep
track of your speculation.

When I get around to it, I'll post a chart of the Dow and my opinion of what happened
around the end of January.

One of the things I try to do when I'm looking at the charts and the volume is imagine what
would I do if I had that position. I know that sometimes those that are called the quant's
have no idea how to factor in the humanity into their equations. I think that's why the black-
scholes breaks down.

Tomorrow I'm going long NLOK.

[eccentrically1]

Any investing theory is somewhat self fulfilling. That’s the nature of a nonlinear market. If you try any of them, you can bet the house a billion other people have tried it.
What sets the Fibonacci series apart is it’s relatively new, and it projects movements based in probability rather than certainty. Most people want a sure thing.

[ME]

Fibonacci was unintended. While indeed close, nonuniform Fourier transform was intended.

I know that sometimes those that are called the quant's have no idea how to factor in the humanity into their equations.

I suspect that Associative Neural networks and Machine Learning techniques are already fully deployed in the trading business..

My hypothesis as an unintended total quant noob, so pardon my noobness.
I think more and more "common"-people are enabled to do some little trading with their phones.
Especially Tesla, Apple, Google and Amazon are in everyone's face when we think about capital.
The human factor seems to be that people tend to reserve a single free day of the week to do recurring stuff.
So each week they think "what would I do if I had that position" just among and like the rest.
I can imagine that to get an edge over their own flock* they actually bet against their own regrets from the previous week.
And thus things resonate with a wave period of two weeks.
- *unknowing that they basically all act similarly.

Once a month there's a monthly business review that will have a similar effect.
This effect is heavier (I measured 2.4x) because even serious traders get influenced by it and asked to put their opinion (or anti-opinion) all over the place.
Add-in the inflicted outrage of random twitter feeds and the "advice" of quants of all measures all around the World and "predictions" will come very close in anticipating the human factor.
Especially when we let a computer determine and quantify each their influencing factor (=a neural network).

I suspect there is hardly a place for a human trader anymore to guarantee a constant win, except for influencing the stack and gambling around a bit.
(Is that too simple?)

[WaltzCee]

(Is that too simple?)

Not at all. It's my opinion when you give a matter a cursory look, it's more intense by several
orders of magnitude than the average person's serious scrutiny. I'm pretty certain you can
turn the heat up anytime you want to. It upsets some people that others are smarter than
them. I'm very thankful there are people smarter than me. It doesn't hurt my feelings a
bit. Gives me hope for a better future. :-) My strong suit is I'm handsome. Women love me
and fish fear me.

You may be aware over the short-term the black-scholes model is reasonably accurate.
They use that model to predict future value of options for tax purposes. Unfortunately over
the lifetime of options, the black-scholes breaks down. Why?

Human Nature. People making the market, who I affectionately refer to as Wall Street
vultures, have detailed Market information. They see that cash piled up, and there is no
damn way you are going to get it out of their grubby little fists.

• Definition: Black-Scholes is a pricing model used to determine the fair price or theoretical
  value for a call or a put option based on six variables such as volatility, type of option,
  underlying stock price, time, strike price, and risk-free rate.

Day trading is similar to playing 4-D chess with deep blue. It can be done but you better be
nimble. You can win some skirmishes, but in the long run it's going to eat your lunch.

People still do have a chance. You approach the matter using Trend analysis. Years ago I
thought Jessie Livermore said "the trend is your friend." According to Dow Theory, when a
stock is making higher highs and higher lows that's called an uptrend. If you buy into an
uptrend, and you're wrong the next day, give it a couple more days. You're most likely going
to be right.

Like most, I always appreciate your input Marchello.

[WaltzCee]

. . .
What sets the Fibonacci series apart is it’s relatively new, and it projects movements based in probability rather than certainty. Most people want a sure thing.

I like looking at normal distribution using Bollinger Bands, also accumulation/
distribution, money flow.

When large traders are determining levels of support and resistance using Fibonacci series,
that's where the "smart money" is and it's impossible to argue with it. Some people
consider that a mystical magical type of indicator where market conforms to the laws of
nature. That's how I see it as a self-fulfilling prophecy, that's where the smart money runs
to. Could you elaborate how those series relate to probability.

Other technical indicators the herd relies on telegraph to the vultures where best to slaughter the herd.

Previous levels of support and resistance confirmed by increases in volume are more
significant in my opinion. What has determine these levels it's not that important as I see it.


Also Elliott wave It's not that new. I'm not certain if it's use is a new practice.

I am now long 10 contracts of NLOK. That effectively controls a thousand shares. If I sell
them for $0.10 more than I bought them for tomorrow, that's $100. My planned exit is to
sell them for a dollar more than I bought them for. Oh the best laid plans of mice and men . . .

I intend to journal that trade in this thread. My purpose is to encourage others to maybe
take a leap into this endeavor. It's only money and you can't take it with you.

[eccentrically1]

I don't know if the smart money follows Fibonacci series or not. But if they did as you say, then the "herd" would fall in line not knowing why, and it becomes a self fulfilling prophecy just as any investing theory would. That's exactly what Elliot waves predict; that crowd psychology moves in those series.
Rather than me posting a huge explanation, look at the wiki entry for an objective summary. You can go as far down the rabbit hole as you wish.

https://en.wikipedia.org/wiki/Elliott_wave_principle

I just watched the you tube video Art posted in the "anomaly or evidence" thread. Interesting that Hogland's team found all those relationships, especially the one regarding the "energy centers" at 19.5 degrees latitude. And, the criticism of both this and elliot waves is the same: pareidolia.

[ME]

You may be aware over the short-term the black-scholes model is reasonably accurate.

You overestimate me.
I didn't even know it existed before you mentioned it.
https://en.wikipedia.org/wiki/Black%E2% ... s_equation

Unfortunately over the lifetime of options, the black-scholes breaks down. Why?

Logic dictates that the needed parameters simply depend on matching a situation from some past until the present and somehow excludes the future :-)
Even when the parameters get adjusted/updated with a sliding window, we still don't know the future.
That's an issue with most extrapolations, where noise is determined by the "human" factor, unpredictable circumstances like pesky viruses, people selling empty boxes stamped with 'A''s, hurricanes that mess around, and people acting on predictions.
It's possible to predict reactions, and the reaction to the reactions with a good enough human behavior model (--> Hello, Google, Facebook, track'n-trace!).
While herd mentality is one thing to get an edge it is because of the inherent feedback of trade that even psychohistory* could not help us here. (*Asimov -Foundation).

At a certain point, things are just not Fibonacci enough or just not enough following predefined wave-patterns...
Patterns eventually mess up and get out of sync so it becomes noise: randomness arises.

The (annoying) thing with a random sequence of numbers is that it's made out of strips of totally predictable sequences.
It is only random when we can't know when one sequence ends and the other begins.
The brain is evolved to detect predictable sequences like dumb day-and night, seasonal changes, and up to music and three-dot-face-alikes in 2D, so that's what it is basically doing.
The only thing we can predict is the inertia of things (linear- and circular extrapolation) and not the noise that lies ahead
That's why.
I think.

[WaltzCee]

. . .
When I get around to it, I'll post a chart of the Dow and my opinion of what happened
around the end of January.
. . .

I've gotten a round tuit. Home Depot was running a special.





I'd like to put in a plug for stockcharts.com. I find it incredibly useful. The two charts above
are Candlestick pattern charts. They are steeped in ancient Japanese wisdom. Truth be
known, the Japanese developed this method for tracking rice prices over time thousands of
years ago. I like them because there is a lot of information obtained just by glancing at
them.

This is my sense of what happened. The week before the 27th of January the Dow begin to
break down. Then on the 27th of January the Dow gap down and they began to short it for
the next four weeks, until the 18th of February.

Then I guess you can see the DOW collapsed into the arms of pre-structured buy to cover
orders. Those in the know made billions of dollars. Those stinking Wall Street vultures.
What makes Smart money the smart money is it's size. For instance if you were locked up
in a cage with a Silverback Gorilla, that gorilla's Einstein.

It's more important to recognize where support and resistance is then it is to know why. I'm
not great at it, however it's real good to know which way these Silverbacks are taking the
market. Then you just agree with them. No sense trying to do hand to hand with a
Silverback.

When you look at the oscillator at the top (RSI) you can see the Dow is getting overbought.
And when you look at the money flow indicator at the bottom you can see money flowing
into the Dow.

My main point describing what I think happened in the Dow is that there are people who
knew exactly how coronavirus would effect the market and how serious it was. We didn't
hear too much about it until after they were ready for us to know. That's how I see it. If I had
detailed Market information I could tell a better story.

I have some thoughts about what you said Marchello but I'll have to wait for another time.
This post has taken a lot of time.

[WaltzCee]

I don't know if the smart money follows Fibonacci series or not. But if they did as you say, then the "herd" would fall in line not knowing why, and it becomes a self fulfilling prophecy just as any investing theory would. That's exactly what Elliot waves predict; that crowd psychology moves in those series.
Rather than me posting a huge explanation, look at the wiki entry for an objective summary. You can go as far down the rabbit hole as you wish.

https://en.wikipedia.org/wiki/Elliott_wave_principle

I just watched the you tube video Art posted in the "anomaly or evidence" thread. Interesting that Hogland's team found all those relationships, especially the one regarding the "energy centers" at 19.5 degrees latitude. And, the criticism of both this and elliot waves is the same: pareidolia.

I follow the link, however I'm no closer to understanding how you see this having any
relationship with probability. I'm still confused. Don't mind me. I can't read minds.

[WaltzCee]

You may be aware over the short-term the black-scholes model is reasonably accurate.

You overestimate me.
I didn't even know it existed before you mentioned it.
https://en.wikipedia.org/wiki/Black%E2% ... s_equation

Unfortunately over the lifetime of options, the black-scholes breaks down. Why?

Logic dictates that the needed parameters simply depend on matching a situation from some past until the present and somehow excludes the future :-)
Even when the parameters get adjusted/updated with a sliding window, we still don't know the future.
That's an issue with most extrapolations, where noise is determined by the "human" factor, unpredictable circumstances like pesky viruses, people selling empty boxes stamped with 'A''s, hurricanes that mess around, and people acting on predictions.
It's possible to predict reactions, and the reaction to the reactions with a good enough human behavior model (--> Hello, Google, Facebook, track'n-trace!).
While herd mentality is one thing to get an edge it is because of the inherent feedback of trade that even psychohistory* could not help us here. (*Asimov -Foundation).

At a certain point, things are just not Fibonacci enough or just not enough following predefined wave-patterns...
Patterns eventually mess up and get out of sync so it becomes noise: randomness arises.

The (annoying) thing with a random sequence of numbers is that it's made out of strips of totally predictable sequences.
It is only random when we can't know when one sequence ends and the other begins.
The brain is evolved to detect predictable sequences like dumb day-and night, seasonal changes, and up to music and three-dot-face-alikes in 2D, so that's what it is basically doing.
The only thing we can predict is the inertia of things (linear- and circular extrapolation) and not the noise that lies ahead
That's why.
I think.

The way I look at the market is it is a game. Maybe like a card game. Now the house or the
dealer gets to look at your cards. When they deal their hand they deal themselves whatever.
they want. Let me explain

When the game begins, or as the price moves up, there are people with very large positions.
If you want to buy, they have plenty to sell. When they sell you stock, that's a round trip.
They had some stock, and they sold it to you.

Now suppose they don't want to sell you their stock. But they want to sell some stock. So they
borrow some, promising to give that stock back to whoever they borrowed it from. And
they sell that stock. They're shorting that market. So what they sell, that is not a round-
trip. However when you buy it you really don't know. When they do that on a large scale,
they're going to be under that market trying to buy. When you can look at the order book,
you can see those buy orders. Back in the day Brokers used to let you look at them. I'm not
sure if you can still look at the order book. Also even if you can you can just get a general
hunch. What they do is have computer programs looking at it for them. They know precisely
how to structure given Market rules so that they can drag that price down. They can
essentially put the price anywhere they care to.

When a broker-dealer or a market maker has a long short position, they have a hedge . They
can come out of that position no matter where the market moves and still be
profitable. When they're long and also short the the stock they're ready for that market to
open up a thousand percent where it's at or a thousand percent below where it's at it really
doesn't matter. They are hedged the market. And they can drive that price up or down.

Based on the information they have from brokers who sell accounts that are called back
Office Accounts, they know exactly which way to move it. They can see your hand.

That's the market in a nutshell. It is the most sophisticated numbers racket ever devised by
man. I love it.

[eccentrically1]

I don't know if the smart money follows Fibonacci series or not. But if they did as you say, then the "herd" would fall in line not knowing why, and it becomes a self fulfilling prophecy just as any investing theory would. That's exactly what Elliot waves predict; that crowd psychology moves in those series.
Rather than me posting a huge explanation, look at the wiki entry for an objective summary. You can go as far down the rabbit hole as you wish.

https://en.wikipedia.org/wiki/Elliott_wave_principle

I just watched the you tube video Art posted in the "anomaly or evidence" thread. Interesting that Hogland's team found all those relationships, especially the one regarding the "energy centers" at 19.5 degrees latitude. And, the criticism of both this and elliot waves is the same: pareidolia.

I follow the link, however I'm no closer to understanding how you see this having any
relationship with probability. I'm still confused. Don't mind me. I can't read minds.

This might help

https://www.investopedia.com/ask/answer ... cement.asp

As you say in your last post the market is a numbers game. And like any gamble, outcomes have probabilities based on the type of game - blackjack, roulette, etc. So for the market, those levels represent those probabilities that they will hold or break, and that outcome determines the next set of levels, and so on.

[WaltzCee]

. . .
What sets the Fibonacci series apart is it’s relatively new, and it projects movements based in probability rather than certainty. Most people want a sure thing.

Still not seeing it, however I am rather dense. You should just give up on me.

Up thread I mentioned the head and shoulders the Dow is forming.

I think it might revert to the levels of May, roughly lows of 23000. If it penetrates that red
line, the 200-day simple moving average, expected to it fall to that level of support.