25 replies to this topic

[EntropyModel]

I copy here my newsletter Feb 9th on topic of prediction - u may or may not find it interesting :-)

Latest comments have been in this thread.

https://www.traders-...sh-to-me/page-3

 

 

https://markdavidson...like-prediction

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Thought to self - Why do people try to PREDICT the market?
I guess I could cynically say - to make a big call then dine off it for years..it seems many people have a cognitive dissonance where they forget wrong calls, and remember ‘the big calls’ - but that’s marketing not trading -

Trading = have a probability (win/loss) system of some kind for entry, exit, stop, profit and ideally risk/reward assessment - I observe most investors don’t have this, or understand it - whereas Day traders/short term HAVE to learn this the hard way. I would add an understanding of position sizing as well.

 

Lets be clear what I am saying, because I am pretty OCD about definitional clarity -

 

Data/Information= the current market price, current market price patterns, current sentiment data, current signals of many kinds ...the key word is CURRENT, as in NOW.

Prediction = the Future and the longer into the future, the less likely you can actually 'predict', of all those above. I would guestimate that the ‘curve’ for future prediction For Intermediate moves drops to about 50/50 by about 1-2 week - beyond that you are into Nostradamus mode. For the biggest trend, I believe its possible for the 6-12 month cycles to have better than 50/50, but its nowhere near 100% - maybe 60-80% at best so not something to not a ‘hill to die on’ in terms of absolute certainty - I see very high odds its still bear market that far out, but I recognize data may change, not to let that mentally box me in.

 

I mean, you can't actually TRADE/INVEST beyond the current day, unless you have a time machine.

 

I do it for 'fun' as start of each year, but, I made it clear that's what it is - and I try NOT to predict. Why? because :

a. It actually impossible, despite the beliefs of many that it is - they are wrong, and I can say that with authority because it a 'math issue' not an opinion - the future is unknown, and the quantum probability nature of universe ( don’t make me explain, you will lose hours of your life and feel woozy - ‘reality’ is infact the ‘view’ produced by an observer consciousness that collapses a Quantum probability waveform via quantum fields) , and unknown future information means prediction is impossible - if by predict you mean know 100% what will happen, you might be able to get better than 50/50 - but that's NOT how most people use this, they make bold proclamations - 'we are headed to 700 spx in over 3 years' or 'its a new bull market' - except, it isn't, is it? not currently, not by well established metrics - how is the comp 'in a new bull market', nor is SPX ...

 

As I like to say - 'if an unforeseen meteor hits the earth tomorrow, no TA of any kind will 'predict it' - because market prices only incorporate known information, plus judgement of future information' - which currently doesn't include a massive meteor strike - so no, Wave counts, Price, technicals, sentiment, chickens feet, astrology etc will NOT see it coming - to believe it will, is to ignore reality, some call that being delusional.

b. It BOXES you in - mentally. I know this from day trading.

Day trading is great learning tool - because there isn't really TA - its just price levels, pattern, and a few signals - so simpler and more immediate - you also get a TON more 'data points' on your skillset - Investing can take 20 years to see faults if you don't make many 'trades', if you do 3-5 trades a day, in a month thats 100’ish ..much faster feedback. I don't find most investors understand RISK, or trade management well - they think its about 'being right', which is wrong, because its actually more about how to manage 'being wrong' - to accept and limit losses.

Once you 'predict' and say 'this shall come to pass' - it puts you in a mental box - ego gets involved, and that's doom as all who have spent enough years trading/invest know.

I can see no benefit ? In day trading I literally just eventually ( it took long learning curve) sat and passively monitoring data the market is giving me in real time - its REALLY BORING!

- I think people are 'looking for buzz' with prediction - the thrill of telling the market what it will do, its fun, i've made some 'crazy calls ' over the years and could point to them like many do - it wows the crowd, but its again a doom because it suckers you in to making the 'crazy calls'.

 

So, take right now -

Do I actually need to know if this is a bull or bear market?

Is it helpful? - we can argue definitions but most people accept 20% drop as bear, but then, what turns that bear into a 'new bull' get more subjective - shouldn't it be a 20% rise for symmetry?

Personally I use different math - which I'm not going to say - doesn't matter but if someone tells me 'we are a new bull market' they need to give their math - 20% rise, a rise above 200 dma , a higher low/higher high etc ...

But again - does it actually help? I have concluded it doesn't, even though I myself say these things!

 

Let me give example using points above from my video’s last few months -

- I went Long 401 K in Oct low as I posted, and I held into the end of year as I said I would expecting to move to cash - ALL during that 'being long' I said its a bear market - yet I was long, so it didn't effect that position.

- I didn't go to cash end of year as posted - I said I need to see XYZ criteria met - still haven't see it ..I still think it s a bear market - so again, why does it matter?

 

This is why I say that to me, from experience, the best timeframes to invest are Intermediate term (it means your aligned with the next higher trend - bull or bear anyway) ...and for 'trading' ironically I find the longer bull/bear trend for smaller positional trades - or day-trades ...I think the worst is Swing ( most targeted and difficult to hold through ALGO games) or positions taken one day held to the next - all my worst trades were those two timeframes.

 

^this is why I say I am 'not a bear or a bull' - I just go off the data ...by which I mean CURRENT not the 'future' possible data ... and as said, the BEST you can do is 70-80% win/loss over longer time, because the market has 'randomness - unknown future information' - AND quantum nature means the 'less likely paths' occur on occasion.

 

TO sum that up - humans are bad at markets generally for 3 reasons ( me included and took me years to learn this)

1. They start predicting - and that gets ego involved and 'mental boxing in' - a bias infact, all data is seen trough the bias - selection bias, confirmation biases leading to 'information error' and 'unwillingness to change position'. Been there done that.

2. Not knowing what timeframe they are trading/investing and so not looking at correct current information - as said, if i'm investing for the IT ..I don't care if its a bull or bear - that only really matters at the turns - if you try to capture the 60-80% of a move it doesn't matter, its if again you try to 'call the turn' at 100% its trouble.

3. Not understanding RISK - Reward - stop loss - profit exit - its as hard, or harder to calculate this than 'buy or sell' signals people obsess over - I found day trading made me understand this and how difficult it is, and I dont see that skill in investors and they would benefit.

 

So, are we in a bull or bear market? Frankly my dear, I don't give a darn :-) ..I believe it’s a bear because it hasn’t been proved its not yet mathematically, and I for many reasons with my prediction hat on - but that is of no current value. I would say it only becomes relevant for CONTEXT of key price levels I use.

So RIGHT NOW - current data - what is is saying. I’ve made quite a few posts, but if you didn’t catch them here a summary

- I (my data) was looking for a ‘blow off’ upward move around the FED - which we got !

- I was looking for 4200 spx cash to act as strong weekly resistance - it has, because it is!

• I was looking for sentiment to shift to bullish side - and this has exceeded my expectations and entered ‘euphoria’ levels - call buying, Rydex and other.

Couple day ago I said - I am seeing this Blow off topping out, and looking over next 1-2 weeks to being a pullback , no target but below 4080 would trigger it.

This is not prediction - prediction would be If I now said - and then this , then that will happen and sure i have a ‘road map ‘ So this is where I need to be clearer - when I start talking road maps - this isn’t about trading, perhaps I should not give road maps but over years people like this - and my road map I’ve gone over in video was exactly this ..a long IT move to flip retail bullish- … I still see we could spend More TIME - so a pullback ..then another runup into March.

 

But what matters is positions

- For investing I remain LONG from October - as I went over in posts - until 3950 is taken out, or new current information makes me move to cash.
- For trading - I said I would not go long here above 4150, as I see 4200 being sold on weekly basis …I’m not going to say how to trade that, but its been good for couple sell off .. and a Break of 4080 is signal for bigger drop/swing down.

Actually - here a copy of posted comments in intraday thread for reference:

I’ve been posting the intraday comment to both Substack and FF - following threads - alot more detail in those threads.

https://www.traders-...for-2023/page-3

https://www.traders-...-bearish-to-me/

https://markdavidson...entary/comments

mark davidson

Jan 31

HEADS UP - Looks more and more like approaching a RETAIL BLOW OFF moment here ..rapid shift to bullishness/covering shorts ahead of the FED here ... I think this will put in the PEAK RETAIL LONG TRADE for this bounce before or after the FED ...

Jan 31Pinned

HEADS UP - I said I would give more indication of my own longer term positions here to help clarify my read - I did go over this in last video. I've been LONG investments since Oct low - and I said haven't seen what I need to YET but looking to move to CASH before next big downleg. OK - so what specifically do I need to still see

- The sentiment 'flip' - getting close as i've gone over

- Technicals weaken ...I believe this will happen next week or two.

- A PRICE REVERSAL -

…So, for now, Risk/reward remains LONG or more 'do nothing' until I see the above.

Posted Yesterday, 12:33 PM

I beleive the current SWING up has topped or topping -  the IT trend is harder to say ..this may just be a drop to clear the overflowing bull bus ..but so MUST hold pivots

 - we blew out top of SPX range 4100 - by 2% upto the 4200 weekly bear resistance post FED  and FAILED there 

 - NYMO gave a sell signal here and summations are rolling over

 - Sentiment has seen on my real$ data one of biggest shifts from 'bearish to bullish' positions relative to price change in HISTORY ..read that a few times!

 - price has failed to hold the breakout pivot 4100

Edited by EntropyModel, 17 February 2023 - 05:32 PM.

[pdx5]

Good post 

[pdx5]

ECONOMY

U.S. inflation is likely ‘far stickier’ and could last a decade, Bill Smead says

 

Bill Smead: U.S. inflation is 'far stickier' and could last a decade (cnbc.com)

[fib_1618]

Until the real cause of this inflationary period is addressed and corrected, no matter of interest rate increases will solve it.

 

It will only suffocate Capitalism as we know it and, I guess, that's the prime objective of all this, isn't it?

 

Fib

[Rogerdodger]

As with TA, All of the instruments in an airplane do not prevent accidents, they just help avoid them.

 

It was no Meteor!

A $12 dollar balloon was shot down this week with a $400,000 Air Force rocket.

It was actually the 1/4% rate hike balloon!

 

The high flying market had it's "Very Strong" seasonal tailwinds curtailed with a single shot.

 

Up until very recently, there was a 90% probability that the Federal Reserve would implement another 1/4% rate hike at their next meeting in March.

According to the CME's FedWatch tool, the probability of a ½% hike has now grown to 18.1%. Exactly one week ago the CME's FedWatch tool indicated that the probability of a ½% rate hike in March was 4.2%. Market sentiment has changed dramatically believing that the Federal Reserve's monetary policy is about to go through an extremely hawkish revision.

Yesterday Cleveland Federal Reserve President Loretta Mester said, "she would have liked the U.S. central bank to have been more aggressive at their last interest-rate committee meeting in January." Her message was clear saying, "We have to do more to make sure inflation is on that path back to our goal of 2%." 

https://www.kitco.co...rger-hikes.html

Edited by Rogerdodger, 18 February 2023 - 11:43 AM.

[pdx5]

Until the real cause of this inflationary period is addressed and corrected, no matter of interest rate increases will solve it.

 

It will only suffocate Capitalism as we know it and, I guess, that's the prime objective of all this, isn't it?

 

Fib

 

The real cause of inflation IMHO is over-spending by federal gov't over and above tax receipts. That is never going to stop by politicians.

Spending other people's money is more addictive than heroin+fentalyl combined. That leave only one method available to subdue inflation.

Which is FED jacking up rates until economy is suffocated, and less money is available from people to buy goods and services.

[mbeider]

Fib,

 

What is the real cause of current inflation in your opinion?

 

TIA

[EntropyModel]

Real cause of inflation isn't a mystery I hope 

 - FED 6 Trillion magic money in 2020 ..that THREE tIMES the magic money created in 2009 to magic our way out of that recession..realize QE is not 'normal' - its PURE DESPARATION and has never been done in history,

you do it because the alternative is collapse of the 'too big too fail' credit bubbles of K - winter.

 - Politicians added another .. 6T or so I lost count on worthless idiocy of that

 - all during global supply chain disruption

 

But the real issue few are understanding YET, is the transition K-spring - simple version is essentially, the Global supply is now outstripped by global demand, we can't

just look domestically because we utilize 'real world commodities' - see the CRB for proxy ...it is showing SECULAR BREAKOUT ..and bonds naturally follow - the FED are FOLLOWING

these they do NOT control them globally ...only domestically ...so ... even with tightening 'after the horse they let out the barn' in 2020/2021 .... they won't have the ability to force 'inflation'

as low as period 1982 to now which was disinflationay K-Winter 

 

^this is a 'meteor' we can actually see :-)

Edited by EntropyModel, 18 February 2023 - 04:11 PM.

[EntropyModel]

Listen - and I will be blunt because I have children who's lives are about to be turned upside down by next 10 years.

 

You need to understand the period 2000 to 2009 -  we had massive, historical asset bubbles because this was a POLICY by the FED.

It was possible to get away with, because of K-winter ...i.e no matter how much money was created, it didn't cause 'inflation' and many scratched their heads and this

made mockery of monetarism - 'cos the theory is wrong, as it ignores K cycles.

 

when the bubbles all collapsed in 2007-2009 - there was no way out except to abandon capitalism - it seem many are living in fantasy where they pretend this is not the case.

What is QE - it is creating money out of thin air, not debt like treasuries but literally 'out of thin air' - if i'm wrong, tell me how? ...that money is then used to purchase treasuries and

 ARTIFICIALLY LOWER RATES - i..e override the key market that control 'capitalism'   - artificially lower mortgage rates to artifically raise house prices to artificially (getting it?) induce

DEMAND in the economy from rising house valuation.

 

>No rational person can believe this is 'natural markets' - i'm sorry to be the one to point out reality, but this is pure fantasy.

 

I predicted this would last to around 2030 - when math shows, it won't be sustainable ..so I predicted 'they' PTB - would have to transition us to new system, and they will, and its obvious.

That is a system that doesn't have the restriction of  demand/supply issues - so they will move us to  a DIGITAL money economy, where they control demand side i.e. money in your bank

will be centrally controlled eventually , so demand cannot ever exceed supply.

 

^this transition has begun - forced by reality of lack of wars, leads to too big population (demand) outstripped commodity usage - a 'PESKY real world ' limitation the PTB banking wing doesn't like.

 

It will unlikely be 'quick' but a 'slow process' over the next decade is my best guess - I call it 'controlled demolition'.

 - over this period rates will stay high ...we will get peaks and drops but trend is up now (secular) ..same with CRB

 - market will have periods (like now) of hope - its operating in 'old mindset' of last 40 years and hasn't yet processes with change - a point of recognition will come sometime in 2023 ..not quite there yet.

 - this process will repeat ...but market overall trend lower but in unusual way, I don't think 'bull/bear' is good way to look at it - the cycles are probably a bit shorter ...so current move up could be  a sort of 'bull cycle' but 

likely will fall short of historic cycles...then drop -  we need to understand this is UNIQUE PERIOD due to QE ...now QT ..and limits on future QE ....plus transition to K-spring.

 

The 'bad' I worry about is typically the Powers solution is 'war' - to reduce demand side ie. population ...but they are getting creative on that ...with lowering fertility, and killing off old and sick with viruses/shots etc

I honestly believe Plan A - is slow reduction of population like this ...but plan B - is frankly WWIII ...of limited controlled type.

 

The really bad news is we have totalitarian minded elites who are using this transition period to gain power over flow on information, peoples freedoms etc ... its VERY dangerous ...and if those few who see it, many here do, don't

step up and try to stop it - I fear we could see a terrible fate - it does NOT have to be  ..

 - this is controversial but I actually AGREE with move to digital economy, and infinite monetary theory ...BUT ..not if it means giving up freedom.

 

but yeah - the next 10 years is going to be tough in that the asset bubbles in housing and stocks must be deflated and debt written off (doesn't have to worse case) ....but the dangerous is Major World War and power removing freedoms.

 

>Really, a full discussion of this is much longer - I am very optimistic about the future, provided we don't allow this 'totalitarian mind virus' to infect everyone, which sadly, so far it is. 

So with my 'realism hat' on - I fear what we'll see is gradually expanding conflict with Russian and China - and the continual attempts to mass control population through the endless Psy ops we've seen.

 

I personally have said since late 2021 I do NOT see any way out of this now - we theoretically could get one more 'down up ' cycle - where FED do QE again etc but it will depend on global factors, so

as per this initial post - best not to predict, its very dynamic ...we need to see how events unfold.   

Edited by EntropyModel, 18 February 2023 - 05:09 PM.

[Rogerdodger]

I have children who's lives are about to be turned upside down

It already has been turned upside down.

Right is wrong and left is right.

Girls must compete against boyz, in fairness and the equality they demanded..

Homelessness is hand in hand with $400,000 missiles shooting down $12 balloons.

The Harlem Globetrotters will always beat the Washington Generals and they will all get on the same bus to go to the next game and paycheck.

Sometimes cynical is truth.

 

"It does not belong to man who is walking to direct his own steps" but we vote for them to rule over us.

Edited by Rogerdodger, 18 February 2023 - 09:05 PM.