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ReDeCoupling: The Gift That Keeps On Giving
Earlier today we demonstrated the first instance of AUDJPY decoupling. Well, sure enough the spread closed within minutes of our observation. Luckily the market is so broken now, that it is allowing all participants another freebie in the form of another major decoupling as stocks once again spike on absolutely nothing, except a few misplaced 1 and 0's here and there. If you missed the earlier decoupling, here is your opportunity to jump in on a trade that has successfully recoupled on 18 out of 18 past observations. For those who already made money on it earlier, double down time is here. Please enjoy spanking those busted robots.
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CADJPY is even worse... or good depending on if u r a robot or not
This is me begging for a push in the right direction. I would LOVE to get in on this action as its predictability seems like a sure thing to cash in on, week after week. So, can someone explain in stupid simple terms what an _absolute_ (as in: I have no idea) noob has to do to get in on this pie? I'm trying to learn about all this stuff but the ramp up time is killing me.
(why do I get the feeling this is going to be like the freshman asking a senior for directions to the bathroom.lol)
Basically, the S&P will drop, to re-couple with the AUD/JPY. It used to be euro/jpy. I find the easiest way to play it is a levraged short S&P ETF. Ton of shares, finger on the trigger.
You have to find what works for you, your account size, your capital. There are several ways to take advantage of it.....
I don't even know where to begin..lol. I'm talking noob of the century here, when it comes to this stuff. Basically your response (thank you kindly) was only half chinese to me. I could read the words, but I really didn't comprehend it. I just want to pay off my college loans damnit..lol. is that so much to ask! hehahha..
Look at the chart provided. The white line is the S&P 500 index. You notice how mid day the S&P spikes off the chart....away from the green line (aud/jpy). Then, the S&P drops sharply to meet back up, or re-couple to the aud/jpy.
Now, notice how the white & green lines trade together, then move apart later in the day. Thats what Tyler is showing you.....
You want to sell the S&P when it spikes away from aud/jpy.....
ok. thanks for explaining what to sell and when. So, what do you suggest is a good resource to actually learn how to actually go about buying and selling in the S&P?
Nearly all major online stock sites allow you to purchase ETF's. The specific ETF he's probably referring to is SDS. The basic mechanism of SDS is that it rises in value when the S&P falls in value, at a leveraged rate (ie., it goes up or down 200% of the direction of the S&P). There are ETF's to take the other side of this trade, like SSO/UPRO/QQQ/etc.
Proshares more or less dominates trading at this point simply because of this leverage.
http://www.proshares.com/#
Full list. You can pretty much buy a leveraged trade in anything even if you have very little working capital.
I don't think this is correct. The AUD/JPY could just as easily jump up to meet the S&P. The S&P can easily move much higher and the AUD/JPY would also move higher until the two eventually re-couple. So if you had a leveraged short ETF, you'd lose a lot of money. You need to take advantage of the spread between the two, not just guess or assume the S&P will move back down and you'll make money. You have to hedge yourself against both possibilities. Simply put, you're gambling if you just buy SDS shares because you see the ES and AUD/JPY diverged.
Do you have a forex account? If not, you'll need one and do you have a futures trading account? You'll need that too! Without these, you're not even able to position yourself properly for this trade.
I want to help you.... don't invest 1dollar in the stock market... work hard, save (as much as you can) cut frivolous spending, pay all your credit card debt first if you have any, live frugal, buy at GoodWill yes you heard me GoodWill, WalMart, DollarStore,etc... save, save, save... pay your student loan, and in the process don't get into more debt.... if you want to invest your savings wait until you have a little bit and start buying corporate bonds (short term because interest rates are going to go up sooner than later) Good companies (spread your risk), buy a property not to flip it but becauseyou like to leave there and you can afford it.... enjoy your life, share, be a nice person, one day you will have more money than you ever thought you would have and you will be a happy person not becuase of the money but because you are a productive human being not a slave of something ephemeral.
I am paying down all my debts religiously. I have one CC now, car and student loans. Compared to some, it's not a lot and every 6 months of saving, I can pay off a huge chunk of debt. I've bought PM's, started a garden etc.. so I'm on that path which you mentioned. I'm just being jealous of you all. I wouldn't mind the quick win to pay down some of the debt, even if it was only a few thousand dollars.
Most of the traders don't make any money in the stock market... just a few.. and at what price... you don't have a life... your life becomes the market, the news, the screens, you end up having hemorrhoids for the amount of hours that you spent just sitting and steering... waiting... waiting.... for some pattern.... just one pattern... just one correlation.... 24/7 for 360....
Trust me.... try to become a productive member of this society, do good to others, have kids, teach them how to work in the garden, enjoy a picnic with them.....
don't follow the sound of the Siren...
Truthfully, the only reason I'm watching all of this is gain a better understanding of it all. I came in at the wrong time as I've come to learn. Nothing is as it seems and I understand why now, (Thanks ZH!!!!!). So I'm more or less using this as an early warning system for now. *sigh*.. I should probably not even bother playing their reindeer games. I'll end up for the worse so I'll just sit back and watch the games.
Investing in the stock market (ie. a buy and hold strat) is retarded, I agree, but there are some pretty obvious plays in the trading that are not very hard to figure out. It's still gambling of course, but it's a bit like playing a video game against the computer and having a pretty good idea of the AI patterns.
LOL. This coming from someone who thinks you buy SDS when the ES and AUD/JPY diverge.
Notice the white line in the middle of the chart....see how it spikes up away from AUD/JPY. Then it drops sharply to meet back up with it.
Now....notice how it's happening again at the end of the day.
lol. no but i saw the opposite what you said.
A conservative play would be to buy SH when this trade decouples, then sell it when it recouples. You can buy SDS but the decay of holding the shares and extra volatility entails too much risk for "noobs." As always, caveat emptor.
I agree. this may be too much for a noob. But if it's this predictable, doesn't that work to my favor somewhat? I know it may not be like this for ever.. but hey, if I can make some extra cash, enough to pay off the debts.. that would rock.
and another thing, as soon as you master this, it will disappear forever. lol - Ned
life's a bitch.. I'm used to it :)
I want to help you.... don't invest 1dollar in the stock market... work hard, save (as much as you can) cut frivolous spending, pay all your credit card debt first if you have any, live frugal, buy at GoodWill yes you heard me GoodWill, WalMart, DollarStore,etc... save, save, save... pay your student loan, and in the process don't get into more debt.... if you want to invest your savings wait until you have a little bit and start buying corporate bonds (short term because interest rates are going to go up sooner than later) Good companies (spread your risk), buy a property not to flip it but becauseyou like to leave there and you can afford it.... enjoy your life, share, be a nice person, one day you will have more money than you ever thought you would have and you will be a happy person not becuase of the money but because you are a productive human being not a slave of something ephemeral.
exactly
jbc/gigeze,
Tks for the advice. There are plenty of noobs out there, myself included though I have learned much here on ZH, seekingAlpha, and other non-MSM sites.
I am also a "noob" in that I can't find a charting system that I can find the AUDJPY index. I thought I could verlay aud, jpy, and sh, but stockcharts does not have the symbol for aud, etc. Is it necessary to have a bloomberg? Or, would you please recommend a charting service or platform. I am know such a rookie, but damn I read this decoupling stuff and get frustrated. Thanks to anyone who can help.
BAM!
http://www.netdania.com/Products/live-streaming-currency-exchange-rates/real-time-forex-charts/ChartStation.aspx
UGrev, thank you so much. Drinks on me at some point in life. Now then, off to netdania.
Have you been able to find ESUO at netdania b/c I have not. Got the fx part of the equation but again not the s&P mini which I undertand is the S&P futures.
I shouldn't even be doing this since you guys don't understand how the trade works and will likely lose money rather than make any but here you go.
http://www.barchart.com/charts/forex/%5EAUDJPY
This one is better. Also free and you can customize the shit out of it. It can measure anything. You can even measure the S&P against the AUD/JPY.
http://www.freestockcharts.com/
EC, thanks for the info. I do understand the trade as I have been reading about it for some time here on ZH. Yet, having been a dumb ass for part of my life, I would only practice this trade to see how much would be lifted out of my pocket. I am just trying to learn the tools of trading as buy & hold just ain't getting any more. Thanks again.
I understand and that is definitely very smart of you. Buy and hold is dead but very few people realize it so you're already a step ahead of most people.
I'd also suggest creating a think or swim account. You can make an account, download their desktop trading platform (not as good as Bloomberg but very close to it) and use all of the tools for free and for as long as you want. Only draw back is you get everything in a 20 minute delay but since you're just learning, a 20 minute delay isn't important right now anyway. Just a suggestion. I use think or swim and I love it. You can even do the paper trade, which is also free and give you free money to trade with. ALL FREE! It's cool, check it out. You can be up and running in less than 20 minutes.
For those who want to play this game:
You'll need a brokerage account that allows you to trade US futures and spot forex contracts. This trade requires a MINIMUM initial margin of $7k (that's to trade a single ES contract + the correct amount of AUD/JPY); more realistically you want at least $9k - $10k so you have a buffer to prevent a margin call if the spread widens. If you don't have at least that much money sitting around to play with (aka you wouldn't mind losing the whole wad), then sorry you can't play nor should you.
That is all... ;-)
Ah, yes, I have been stuck in freestocks.com since you recommended it. I am going to do their tutorials and implement the "think and swim" idea as well. Damn, there goes my personal life, but then again, my kids are teenagers and could give a shit, my girlfriend has kids that don't give a shit, and, in terms of Pamela's suggestions, I really love this and I do have one of those hemorrhoid donuts. LOLOL My dog will still like me though. Thanks again....
Ugrev, the leveraged ETFs are really sharp tools. see #449734
and Pam's more easily accessible comment:
Like all free advice, it is worth what you paid for it.
- Ned
This post probably spells the deathknell of the reliability of this trade.
What about the previous 17 posts on the same topic? The trade is still working. But yes, at some point the influx of new participants will have a negative effect on the money making efficiency of the trade.
WOOHOO! We finally passed 600 million shares. Gotta love it when all those small investors, uh, er, say screw this. I can't wait to see what happens when the Euro retests 1.16 and the "experts" all cry on Bubblevision again. Nothing has been done to address the solvency issues in the Irish, French, and Austrian banks and that's when the ReReRECoupling causes a massive panic out of Europe, into the dollar to create the ultimate trap as our muni market implodes right after everyone piles into our securities and currency.
i timber has volume...
Gotta love it, too, when this BS concentrated market has the S&P and DOW both positive yet the Russell 2000 is down 1.1%.
shouldn't this be proof that S&P and Dow are kept up solely on futures manipulation?
Exactly. The fewer the stocks, the easier it is to manipulate the index.
The same can be said for the overall market. With fewer and fewer "players" concentrated in fewer and fewer stocks, the easier it is to manipulate the market. However, when the music stops...and it will, very soon...the resulting conflagration will be breathtaking.
And volume is down by how much from the average today?
SPY: 130MM vs. 10 day avg. 255MM vs. 90 day avg 247MM - Ned
Kinda like a Kinder Egg or the anal dildo for homos.
And the markets are the homo rapists robb/butt/raping my shorts today. Je-eeesus christ
I know this is off topic, but is there a difference between a hetro dildo and a homo anal dildo? I'm new to this and I'm sure the answer will be life changing.
Liz Clayman just blew me away when she got all excited after the Dick Bove interview where she said "and look, Citigroup was up 1 3/4% before the interview and now it's up over 2 1/2%!"
On a freaking $4 stock. Woohoo. These people are not taking their designated doses of Prozac and or Xanax. Personally I would prescrive Valium and bourbon but I'm not a doctor nor would I invest in one in these markets.
You had me at "Liz Clayman just blew me"...
+1. Had to google her, what a disgusting cougar. She must be a member of a solid union for keeping that job. Not only is she stupid, she's ugly and old.
After 5 scotch on the rocks and 2 Valiums every 3 = 10.
Yeah, and if a ten ain't enough, she'll be an eleven at 3 am, stumbling out from the bar...
http://www.majhost.com/gallery/daveofdeadair/fart/lizclaman.jpg
damn, bro.. those nipples just scratched my monitor from the inside.
Time to drop a dime to US Customs -- someone's smuggling raisins!
" Last nite I came in at 2 with a 10 and at ten I woke up with a 2." Willy Nelson
Yeah, but she could moonlight as a "juggie" on "The Man Show"
Evolution.
Someone brought up a common misconception earlier today. That ZH reinforces on a weekly basis, if not daily.
Mr.Denninger.
http://www.youtube.com/watch?v=xOr5suFJ6-k
What he does not explain in this video is that algorithmic trading uses a decision matrix to arrive at a decision to buy, sell, or cancel an order.
These matrices are very complex and in some cases have thousands of decision variables.
How it works:
In most cases non linear programming is used. http://en.wikipedia.org/wiki/Nonlinear_programming
We assign theoretical costs to a variable and plug it into a function who's objective is to minimize costs.
A random example: if volume is low the theoretical cost is high. Lets say on a 1-10 scale we'll give it a 10. If volume is high it's cost is low, lets say 1.
The variable list can be short or long and in a more complex decision matrix the solution is infeasible and no trade is placed.
Mr.Denninger's panic attack about nefarious groups breaking laws, etc... is possible, but it's more than likely that a decision matrix placed the trade and in a less than a few seconds reanalyzed the current marketplace and canceled the trade. The algorithm had every intention to complete the trade if the conditions remained the same but they didn't. The changes in the marketplace made the algo cancel the bid or ask.
You can place an order GTC(good till canceled), right? Well so can an algorithm. And I guarantee you that on a microscopic scale, where milliseconds count, an algo can out think a human each and every time.
So what can you do? How to get involved:
Create a good decision matrix, your analysis of the marketplace will lead to your key variables(the secret sauce). You'll need an optimizer. The industry standard is iLog's Cplex currently owned by IBM. Understand non linear programming and feasibility. Use the outcome from your optimization to place an order(buy,sell,cancel). Goldilox offers an interface for algorithmic trading, but so do many others.
Also check out:
http://www.orangecap.net
http://sourceforge.net/projects/algotrade
http://quantlib.org/index.shtml
With this information hopefully 'we' can get over the misconceptions that the marketplace is rigged.
The marketplace has changed.
"misconceptions"?!?!?
This post has definitely now put you in the lead for the "ZH Troll of the Year" award.
Personally, you have my vote, but keep it up just to make sure.
Ignorance, a key characteristic. Keep trading because I need more assets specifically another Maybach.
One day I hope that the exchange will release counter-party information, maybe complete with a photo of the 'victim'.
On second thought I take that back.
Here is everything you need to adapt to a changing marketplace. Your choice is to ignore and ridicule. You could create a topic on the ZH Forums to make some secret sauce and implement your own changes. Nothing. No change only complaints and ridicule. Good luck my friend.
@Scooby Dooby Doo, I don´t even need a decision matrix. Denninger´s observation is not a NEW one. I have observed this for years to happen in the Globex overnight sessions. The only answer is to throw a 1000 lot order into this bullsh1t. Like I sometimes do. But I suppose not enough players on ZH to actually have the guts to hit the offer or bid with a 1000 lot order. What do you think happens if you execute increments of 100 lot orders in 3 millisecond timeframes in the Globex overnight session ? Try it and you will see how algo "matrix decision" react...I have some experience with it...:=)
Yup. For the worse. It's not a "market" any more. It's an algo playground being driven by programmer ego trips. If you mean that the market has changed in a way that its original intent has been bastardized, then you are right. It has.
Interesting! I have done a little (read: miniscule) amount of coding in my day and what you are talking is making sense.
And for what it's worth, I think I actually notice some orders getting at least partially filled on those big algo placed blocks from Denniger's video.
i'm guessing this will recouple AH...after AA reports.
WTF kind of day was this. End up where we started?
p.s. Weak stick save BB. You need more viagra, pump Pfizer.
I guess the market being at +/- 0.00 means that Alcoa is going to trigger futures up 20 pts by morning...
You think just like me.
They will set the close up with a bearish candle right on the downward sloping 50 day moving average. Then Alcoa will SUPRISE everyone by beating there lowered forecast. Alcoa may wait till 4:20 to report this way they can gap open the index futures at 4:30 est.
The morning report will read stock futures surge on up beat Aloca report.
Err..the spread did not close, you've changed your chart sync point...
I've circled your earlier sync points:
http://img684.imageshack.us/img684/8906/sp3220100712160722.gif
Seen more clearly on the left hand side of this chart with more sync points:
http://img820.imageshack.us/img820/4493/sp3220100712162110.gif
Tyler, I need this posting earlier throughout the day. My algo is reacting to the expression "decoupling" in your headline...:=)))
I agree with the others that this did not recouple earlier in the day. It is easier to spot the disconnects if you plot the actual spread trade of the quantities or in the graph, plot them as a ratio instead of the two lines.
Leveraged ETF's decay over time due to daily re-balancing to keep their fixed leverage ratio. The longer you hold them the more money you lose to decay. Inter-day volatility will kill you. Their only use is for day traders who think they can pick up pennies and hide from the HFT gangs.
Not much of a gift at the moment is it, decoupled even further overnight...
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