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Bull or Bear Market. Does it Matter?


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#21 EntropyModel

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Posted 25 February 2023 - 06:18 PM

 

 

 

Mark, we had this argument 15 years ago, check your posts, I have excellent memory of you saying just the opposite.... that you had to know whether you were in a bull or bear market for longer term decision-making.

 

So you have changed your mind, have you?

Which Mark???

 

 

biggrin.png  ..well exactly.

 

If it was me - heck, 15 years ago..I change my mind on stuff ..I think its called 'learning/experience'...i've learnt ALOT in the last 15 years and changed my mind on many things that is for sure.

 

I have bit more time so let me say, I believe Mark(OEX)  wink.png has a very good sense of the market, which is maybe something that is not totally quantifiable in TA .we could loosely call it 'read of the tape' which

is very experienced based. Whether that is partly due to knowing what the main trend is - bull/bear ... partly but I see in my own evolution that is partly the 'school of market hard knocks' type deal -learning what is

important and what isn't  - and I think, some of this is very hard to communicate to others, so, we may say things differently and kind of argue semantics but end up actually thinking similarly. 

 

So what I was trying to say in that post about prediction, was more about avoiding being dogmatic and rigid in belief about a certain trend ...more than saying its not useful to know the trend - obviously its very useful to

know if it a bull or bear! ...but my point is, we cannot know for sure - and maybe best we can do is 60-80% 'sureness' .. and so we must remain flexible to change that view based ideally on some method that shows

good backtested history. 

 

Right now If I was forced to answer i've said my 'math' says its a bear market - and turns to bull if we get a weekly close above 4300 ....but my main goals is to try to be in synch with the one trend below that but it changes,

sometimes that trend is also 'murky' so as I said

 ->its about trying to synch with the clearest trend you can identify, whatever that is!

 

hope this is clearer.

 

I figured we were not as far apart as one might think.

I wanted to add that, for me, there's a huge psychological benefit to knowing if we are likely to be trading like a Bull or a Bear Market. My stuff works very differently in a Bear Market, and in point of fact some very good indicators (especially the Buy signals) don't work so well. Now, I know we're supposed to be sang froid as traders, but for me (and I think most of my subscribers), the psychological cost of a long string of losers--even if they are small--is remarkably high, often resulting in not trading signals that actually should be taken when they should be taken.

Avoiding those frustrating runs is really beneficial and not just avoided losses but also missed bull moves.

The Other Mark

 

 

Yep - both great points Mark ( ones I bolded). 

 

My stuff is a little different on the first point - 

 - The Model I developed 'in theory' (and we all know how well 'theory' works :-) ) ..is independent of bull/bear for the IT signals. It a big topic of how - but like I say it uses 'math' of 'cause/effect' Reversion to mean/extreme, I would say its

actually worked to be fairly independently  - but I still use TA to add 'sanity check' - I want the Model signals and the TA to AGREE to get high confidence.

 

For  TA I do definitely agree with you, it works differently in CONTEXT of bull or bear, as over the years i've made this point many times that

   > is often more important NOt what the signals say 'buy/sell' but  HoW the market REACTS - 

 

So  - If I have a high odds winning BUY, and it doesn't work out ( either flat or down market) - then as you say, its an indication the next higher trend is DOWN ( so for IT signals, would mean Bear market).

 

It's funny - this is one of those experience things, that, its 'obvious' ..but somehow is hard to follow, and I would say suffers from 'selection bias'

 - when a signal 'doesn't do what it should' - we can choose to another signal and say 'well,  I should have used this one' - there are ALWAYS some signals that are 'right', and 'wrong'.

 

I suffered from ^this ( and many other trading/TA learning curve issues ) - I had so many signals, so could always kid myself 'you should have looked at this not that'. 

( I said this was a long discussion I was trying to avoid LOL).

 

>>My SOLUTION in the end - was to PICK only a smaller number of 'the best of best' TA signals - and ignore the rest, because at that point, all they do is 'confuse the issue'.

If some asked me at this point, i'm at 23 years'ish and still learning ... I would probably say Just look at Internals - summations/NYMO   in terms of KISS.

Ideally, I think you also need Sentiment - we both agree on that being key - and we could lump VIX into that, though, I think its more than sentiment and I use it a key part of my model.

 

 

Your second point is well taken - regarding effect of losing streaks on either missing the next good signals, or could be reducing position size too small.

This is where ALGO or mechanical systems have a big advantage!

 

Part of the problem is often feeling the need to 'always have a position' - this gets back to my point about prediction

 - We do NOT have to be LONG or for that matter short - we can be in CASH as a 'position'

 - I learnt this day trading really - that my job was to 'stalk the optimal setup' - where RIsk reward and win/loss probability peaks ...again humans (not just me I think) SUCK at that, having the patience to WAIT for that 

moment like a predator catching prey .... as humans we also have pesky issue like losing mental focus, getting tired, having distractions etc which I why I stopped day trading and moved now to longer timeframes where

its not such an issue. 


Edited by EntropyModel, 25 February 2023 - 06:21 PM.

Question everything, especially what you believe you know. The foundation of science is questioning the data, not trusting the data. I only trust fully falsified, non vested interest 'data', which is extremely rare in our world of paid framing narratives 'psy ops'. Market Comments https://markdavidson.substack.com/?utm_source=substack&utm_medium=email https://www.youtube.com/playlist?list=PLznkbTx_dpw_-Y9bBN3QR-tiNSsFsSojB

#22 K Wave

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Posted 25 February 2023 - 07:30 PM

This might help trigger the move out the wedge...BRK Earnings

 

https://www.cnbc.com...gs-q4-2022.html


 


The strength of Government lies in the people's ignorance, and the Government knows this, and will therefore always oppose true enlightenment. - Leo Tolstoy

 

 


#23 K Wave

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Posted 25 February 2023 - 08:42 PM

 


It's funny - this is one of those experience things, that, its 'obvious' ..but somehow is hard to follow, and I would say suffers from 'selection bias'

 - when a signal 'doesn't do what it should' - we can choose to another signal and say 'well,  I should have used this one' - there are ALWAYS some signals that are 'right', and 'wrong'.

 

I have made some of my very largest scores over the years, by immediately flipping sides when I was Expecting the Zig, but the market started showing the Zag instead after initial move in Zig Direction.

This took me a while to get the hang of, as one never likes to be "wrong", but I now use it my advantage, and play even bigger when the reversal shows up, as the trade is now MUCH more likely to work.

 

Since a lot of my big trades come out of compression zones (like now), the charts very often get really looking like it wants to go one way, and starts to move that way, just before they pull the rug on the "breakout/breakdown" and go hard and fast the other way.

 

In fact, I have noticed that MANY of the great moves begin with a fakeout move first...so whenever coming out of a compression zone, I am ALWAYS on alert for early failure, and prepared to flip sides.

 

My time frame charts are littered with throwovers and throwunders that quite frequently turn out to be fantastic signals of the failure of one direction, and the other direction about to take hold. And if the fakeout is of the Island nature, an even more powerful signal.

 

And taking out the top or bottom of a throwover/throwunder is also a signal...it means whatever side has the ball really means business, and you should generally not try to fight it. So back above Dow 34K now would be one of those situations.

 

Currently, we have tons of 4 hour (a very significant time frame) throwover charts out there right right now, and more very close...so unless bulls do get the quick recovery, bears are potentially a step away from tearing things open.

 

Trannies chart below is a very relevant current example. Should it start to break down from here, likely to be hard and fast. But should it find its footing over next day or 2, and climb back over about 15300, it would likely be headed quite a bit higher. Being that I still have somewhat of a bear bias at this juncture, I am expecting a break down. But if that DOES NOT occur, will flip bullish pretty quickly.

 

Also note on the Trannie chart, the failed launch attempt just before the Covid plunge back in 2020. Sure looked all setup for launch after the 900 back test, and then 200 as well, but those who did not heed the failure got slaughtered. And note also the great fakedown just before the launch in May 2020.

 

Even out of a bull or bear flag, they will usually throw a small head fake first, before the move out of the flag gets underway.

I have also used this fact when I am feeling really confident about direction swing term to buy or sell into the fake moves, and nearly top or bottom tick things sometimes, although I usually wait for the reversal confirmation before I hit things in size.

 


The strength of Government lies in the people's ignorance, and the Government knows this, and will therefore always oppose true enlightenment. - Leo Tolstoy

 

 


#24 OEXCHAOS

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Posted 27 February 2023 - 01:46 PM

 

 


It's funny - this is one of those experience things, that, its 'obvious' ..but somehow is hard to follow, and I would say suffers from 'selection bias'

 - when a signal 'doesn't do what it should' - we can choose to another signal and say 'well,  I should have used this one' - there are ALWAYS some signals that are 'right', and 'wrong'.

 

I have made some of my very largest scores over the years, by immediately flipping sides when I was Expecting the Zig, but the market started showing the Zag instead after initial move in Zig Direction.

This took me a while to get the hang of, as one never likes to be "wrong", but I now use it my advantage, and play even bigger when the reversal shows up, as the trade is now MUCH more likely to work.

 


 

Stig Olassen (I may have the spelling wrong), a long time F-Fer, one time pointed out that while the rising wedge is typically a Bearish pattern, if it breaks UP instead, it's a reliable Buy signal. I've used that many a time for some nice quick gains. Same basic idea.

 

Mark


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