What Are The Odds?

So, I sent text messages to my trader friends and family members last night right after I posted my "Don't Be Fooled by the Rebound" warning here. And, almost everyone of them went long on the dip this morning. All I got in reply was pretty much the same comment seen here --- you got less than 1% chance that today would close below yesterday's low.

I guess the market happened to hit that less than 1% probability today.

In any case, while "the bottom" is still nowhere in sight, from where I'm standing, a VST (very short term 1-2 days) bounce should be expected right around here.

BTW, this appears to be a very chatty day. You guys will have to teach me how you do it on one of the most volatile trading days of late. I barely had time for lunch trying to take full advantage of the volatility.

Later....

I guess the market happened to hit that less than 1% probability today.

Yes, it did.

I also believed the rally was a joke - http://www.traders-t...?...st&p=567811

We can always become more oversold, but anyone taking new swing shorts at this point is nuts. I closed mine out yesterday on the morning gap and have no regrets.

Under normal circumstances, we would have a bounce here. With the events in Japan, who knows. As I had said before, the only way for us to continue the decline is to crash. Looking at futures after hours, we are crashing! I don't make bets on crashes, I just try to play what is most probable and a close below yesterdays low was NOT probable. Over time the wins will be in my favor.

Here's a simple quick chart that shows just the panic we have short term.

I'm with you Techman.... Out of all the talk around here to follow the trend, we have many going long before the turn..... I warned about the slide when 8-day crosses the 34-day moving averages.... The slide has an accelerated phase that many here discounted..... Regardless, I believe it is prudent to put stops in on short positions to lock-in gains..... Barry

I guess the market happened to hit that less than 1% probability today.

Yes, it did.

You have to be one of the unluckiest men alive.

Nonetheless, less than 2% decline is not panic. On the other hand, what happened to the Nikkei is panic. And, futures trading lower by less than 1% is definitely NOT crashing. There's neither panic nor crashing in the U.S. market, yet. It's nothing more than a normal course of a way over due correction.

We can always become more oversold, but anyone taking new swing shorts at this point is nuts.

Loosely based on some members here used to say to the bears, I know this sounds "nuts", but wouldn't it be less nutty just to follow the "trend"?

At any rate, if the only way to close below yesterday's low is to "crash", it'd be "nuts" NOT to carry swing shorts.

=================

Barry - Yes, you’re right on top of this one. And I'm all for profit taking. Don't forget to pitch in whatever you can with your winning money to help out our Japanese friends.

All right, Jacuzzi time.... Best way to end a busy day and start a relaxing evening.

Edited by TechMan, 16 March 2011 - 06:32 PM.

You have to be one of the unluckiest men alive.

The market is under some extreme conditions with very high emotion. Luck has nothing to do with it.

It's nothing more than a normal course of a way over due correction.

The SPX is now nearly 3STDs outside it's 20SMA, that is not at all normal.

Loosely based on some members here used to say to the bears, I know this sounds "nuts", but wouldn't it be less nutty just to follow the "trend"?

I make trades when the opportunity presents it self. It's never nutty to take a position when it is backed by tested methods.

At any rate, if the only way to close below yesterday's low is to "crash", it'd be "nuts" NOT to carry swing shorts.

I said it was nuts to be adding, please read carefully.

Edited by orange, 16 March 2011 - 06:54 PM.

I said it was nuts to be adding, please read carefully.

Adding or carrying…. if the only way the market would close below yesterday's low is to crash, then you should do both.

The market is under some extreme conditions with very high emotion. Luck has nothing to do with it.

You predicted 1% of the probability, and it happened to hit that 1% probability, not the other 99%. Either you're the unluckiest man alive, or your probability simply didn't work.

And, yes, luck has a lot to do with trading. That's why many traders I know are very superstitious.

The SPX is now nearly 3STDs outside it's 20SMA, that is not at all normal.

I did mentioned that STD a couple of days ago already. Everything's relative. That's what happens when the correction is over due. And, in that context, it's not that abnormal to me. In fact, it's fully expected by me.

All right, I'm stepping out… Will check back later if you'd like to continue.

Adding or carrying…. if the only way the market would close below yesterday's low is to crash, then you should do both.

Why would I hold continue to hold onto shorts at 1255ES when the probability of more downside is so terrible?

You predicted 1% of the probability, and it happened to hit that 1% probability, not the other 99%. Either you're the unluckiest man alive, or your probability simply didn't work.

A probability is just a statistic based of some set of data. It doesn't matter if it didn't work out this time.

You can believe what you wish, but we closed 1 point below 1255ES, and the probability STILL remains VERY MUCH to the upside. I look at futures now and we appear to be up over that important 1255 level. You could have sold at the open yesterday and had the same profit on your shorts (assuming one held).

A probability is just a statistic based of some set of data. It doesn't matter if it didn't work out this time.

I've never said it matters. You're the one that came to this thread and made it mattered.

(1) Why would I hold continue to hold onto shorts at 1255ES when the probability of more downside is so terrible? (2) You can believe what you wish, but we closed 1 point below 1255ES, and the probability STILL remains VERY MUCH to the upside.

You've lost me there. I'm not even sure what was it that you're asking in (1) above. Are you saying that you're holding short positions because the downside is NOT terrible? I've only read a handful of your posts, so I'm not familiar with your holdings and what not.

In any regard, if I understood you correctly, you're holding short positions now as stated in (1), but your "probability" tells you it's highly likely to move to the upside, as stated in (2)???

Adding or carrying…. if the only way the market would close below yesterday's low is to crash, then you should do both.

At any rate, if the only way to close below yesterday's low is to "crash", it'd be "nuts" NOT to carry swing shorts.

...

Obviously you should be holding shorts if the market is going to crash, but you are missing the point completely... The PROBABILITY IS TOO LOW that we would close below 1255ES. So why would I add new shorts???

There is nothing wrong with someone holding shorts if the trend is down and that is suitable to their style, but if you are holding onto shorts because you think a crash is coming here, you are fooling your self.

Obviously you should be holding shorts if the market is going to crash, but you are missing the point completely... The PROBABILITY IS TOO LOW that we would close below 1255ES. So why would I add new shorts???

There is nothing wrong with someone holding shorts if the trend is down and that is suitable to their style, but if you are holding onto shorts because you think a crash is coming here, you are fooling your self.

I'm missing the point because you're not answering my question directly. You're going around in circles, perhaps using some of Tor or Fluid's techniques.

Here's my question to you.

1) Why are you holding short positions while predicting that the market is going to go up? I'm not talking about "adding".

2) I went back to your past posts and found you mentioning that the only way the market closed below yesterday was to crash. And, in your original response, you mentioned that futures were "crashing", though it's now in green. Now you're saying that "you" are fooling yourself for carrying shorts if "you" think a crash is coming.

Tell me if the only way is for the market to crash today, why shouldn't "you" carry short positions to cash in on the crash? Why would "you" be fooling yourself when that's the only way the market is going to go?