Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Words of Wisdom from Saint George

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For newer Slopers, you should know that George Carlin is the patron saint of this blog. I was reading an interview with him last night – the last one he ever gave, I believed – and his words resonated with me (as they often do)……..

I’ve addressed this before when the question is asked more bluntly: Are you an angry man? What are you angry about; what are you so angry about? I don’t live an angry life, not an angry person. I rarely lose my temper, can’t remember the last time, never had a physical fight in my life, don’t carry grudges, don’t carry resentment either. Very very lucky in those respects. But I feel a very strong alienation and dissatisfaction from my groups. 

Abraham Maslow said the fully realized man does not identify with the local group. When I saw that, it rang another bell. I thought: bingo! I do not identify with the local group, I do not feel a part of it. I really have never felt like a participant, I’ve always felt like an observer. Always. I only identified this in retrospect, way after the fact, that I have been on the outside, and I don’t like being on the inside. I don’t like being in their world. I’ve never felt comfortable there; I don’t belong to that. So, when he says the “local group,” I take that as meaning a lot of things: the local social clubs or fraternal orders, or lodges or associations or clubs of any kind, things where you sacrifice your individual identity for the sake of a group, for the sake of the group mind. I’ve always felt different and outside. Now, I also extended that, once again in retrospect, as I examined my feelings.

I don’t really identify with America, I don’t really feel like an American or part of the American experience, and I don’t really feel like a member of the human race, to tell you the truth. I know I am, but I really don’t. All the definitions are there, but I don’t really feel a part of it. I think I have found a detached point of view, an ideal emotional detachment from the American experience and culture and the human experience and culture and human choices. 

But even if I am a cynic, they say if you scratch a cynic, you find a disappointed idealist—that’s what’s underneath. That’s the little flicker of flame, has a little life in it, the idealist: I would love to be able to entertain that side of me, but it doesn’t work like that. I don’t see what’s in it yet, I mean I just like it out here. 

I’m not an angry person, just very disappointed and contemptuous of my fellow humans’ choices—and on stage those feelings sometimes are exaggerated for a theatric stage—you’re on a stage you have an audience of 2500 or 3000 people: you need to project the feelings, the emotions it’s heightened, and people mistake it for a personal anger but it’s more dissatisfaction, disappointment and contempt for these things we’ve settled for.

Reading Context (by Greg)

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In my last missive here on Slope, I mentioned the importance of context to trading.  I also mentioned how different traders have different ways to frame price action in an understandable context that significantly raises the odds on their expectations for a given setup.  In this example, I'm going to show you exactly what I look at, and how I read the tape and anticipated the blast off in the market that happened over the last couple of days.  If you go back to my tweets (gmcgary), you're see I mentioned the market was setting up to rape the shorts, the day before the launch occurred.  In this post, I'm going to walk you through what I was looking at and how I read it to reach that conclusion.

We'll use a daily chart of the ES as our big picture for gaining a feel for the context of price action:

2010-12-02-TOS_CHARTS

What we have is a set of Keltner Channels draw on the daily chart and one horizontal line drawn at 1174.50.  We'll pick up price action at the first oval.  From left to right I'll refer to them as 1 through 5.

1) At this point we have the trend reversal hitting it's first key support level, which is the confluence of both the horizontal support level and more key the centerline of the Keltner Channel I have draw.  Nothing unusual here.  At reaching this level, I'd close shorts as the expectation is to bounce and back test the underside of the underside of the upper channel line.  Move along nothing to see normal price action.

2) The underside kiss of the upper KC is expected, what is very funky is to do so with a hanging man.  Also such a large range at this point is odd, and not normal for what my brain cells recall in this exact situation.  That put's us on yellow alert.  Price action is not acting according to known price and volume profiles that lead to a pattern completion, which in this case would be 1125. 

3) At oval 3, we get a close below the mid line of the KC.  That is consistent with a upcoming move to 1125, but the previous Hanging man calls for caution as we're still on yellow alert.  Being suspicious of this market I'd only day trade at this point.  The next day's close above the KC centerline is totally not per know price action in this situation that goes on to the original target of 1125.  The pattern is basically blown at this point, so as far as a short opportunity we are on red alert.

4)  While point 4 closes below the mid KC line, one might conclude wee haw we're on our way to 1125.  Not so fast.  Experience tells me we need to have two days close below the centerline in a row for the pattern to have any chance of completing.  So at best we can go back a notch to yellow alert (as far as shorts are concerned).

5) The doji at oval 5 confirms it with a close above the KC midline.  The pattern is completely blown.

The next day the only point in question was would da boyz get a close above the centerline during the day which I believe was around 1187, or would they go the after hours route and ramp the open.  The simple fact was it was too costly to get a close above 1187, and as long as only one close was below the centerline, people who know this stuff wouldn't pile on short, so they had the option of doing the buying during Globex.  Seeing the setup against the shorts, is what caused me to tweet that shorts were being setup to get raped.  The rest is as they say history.

The take away I'd like you all to have, is there is a way that volume and price play out relative to a given setup.  There is only one way to know what that is.  Which is by watching live charts.  Over time your inherent natural pattern recognition will just know what is normal, and know what isn't.  It's all about trade expectation, but what no book I've ever read tells you, is how to decide when to take a given setup.

If you want to rock at trading you need to know the things that are out there in many books, but the real key is as MarketSniper likes to always say is right between your ears.  You need to be aware of the context and how price action is playing out within that context.  If you have read about risk management, trade setups, and God knows what, and are struggling at being profitable, then take a look at your efforts in understanding context.  Again to quote MarketSniper "I only trade on my terms."  What he really means is that when he has a setup that is occurring within a familiar context where he has a high expectation, then he takes the trade.

Lastly, I want to say thanks again to Paul aka "Peachin", who clued me into reading the tape.  He's an old timer on slope, and pops in once and awhile.  Listen to what he says if you get the chance.  It's all golden.

Schopenhauer’s Retreat

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Well, since this was a lousy week for the bears, from end to end, I thought I'd put up a really desolate bar this time. I personally have been throwing in the bear towel, thread by thread, and I am currently positioned 35/65 bullish/bearish. It shouldn't be a surprise that most of my current profits are housed within long positions (like FLR, GPC, GPRO, NOG, PCX, PETM, SOA, TCK, and WYN).

If even a wretched jobs report can't make the market tick down, one really has to wonder.

1203-abandonedbar

This Comment Merits Its Own Post

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Springheel Jack is one of Slope's most esteemed and valuable participants, particularly since he does a substantial post every weekday morning. He has my gratitude, as he does the vast majority of the community.

I noticed a comment he made recently, and I'd like to share it in its entirety (with a few items emphasized by myself) since I think it's worthy of its own post. Thanks, SHJ, for this, and everything else.

Here's a repost from my reply to Tim's post on the last page. It's sort of a resigned bear's manifesto: 
 
Tim, great post and I know exactly where you're coming from. The last twenty months have been bruising for all those of us who have read enough economic history to expect current policies to end very badly.  
 
Timing as with so many things is the key here. I think the old Dow Theory maxim that the basic trend of the market could not be manipulated has been convincingly disproved since March 2009. It was the first time this maxim has really been tested thoroughly and as it happens, it was wrong.  
 
What we're left with I think is that the market can be supported by the US gvt and the Fed as long as their credibility and credit holds out. That might take a year or two even at current rates of spending and in the meantime we could see some extraordinary and obviously unsustainable things happen, as one can see in any bubble.  
 
Pug thinks that we are starting a new secular bull market and thinks that current imbalances will somehow be sorted out by the market within that secular bull. I disagree though I'm expecting it to be sorted out by the market too, but I'm expecting that to be in the traditional manner that the market deals with any spendthrift borrower, through rising interest rates, tightening of credit and eventually default. When we see that process advance to the stage that the Fed can no longer easily borrow or print huge sums of money, the house of cards that they are building now will collapse and we will see the end of the current secular bear market in the traditional manner with an unmanipulated cyclical bear market and revulsion low.  
 
I was talking to Trader1 yesterday about the view expressed by many slopers that because of market manipulation, technical analysis is now irrelevant. I told him that in my view that was back to front, and that as long as the market is being supported this way, it is economic analysis that is irrelevant, and the only thing likely to guide us through this is technical analysis, which has been working just fine if we tune out the broader economic picture.  
 
Just my 2c as a long time admirer of your work. I'm no less bearish than you in the long term. I'm just further along the road of accepting that this will end when it ends, and in the meantime we should just trade what we see rather than what we expect.

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