04/27 Awesome Oscillators: All moving up

U.S. stocks moved higher Friday. The Dow Jones industrial average rose 28 points, or 0.2%, to end at 13,228. Alligator's mouth open up widely. 

The S&P 500 rose 4 points, or 0.3%, to 1,403. Awesome Oscillator moving up.

The Nasdaq added 18 points, or 0.6%, to 3,069.

04/26 Awesome Oscillator: All coming up

The Dow Jones Industrial Average jumped 114 points, or 0.9%, to close at 13,205.

The S&P 500 gained 9 points, or 0.7%, to settle at 1400. Both the Dow and the S&P 500 have now risen in three straight sessions.

The Nasdaq , which jumped more than 2% on Wednesday, added 21 points, or 0.7%, to finish at 3051.

04/24 Awesome Oscillator: All going down

The Dow Jones industrial average (^DJI) rose 74 points, or 0.6%, but Awesome Oscillator turns down.

The S&P 500 (^GSPC) added 5 points, or 0.4%.

The Nasdaq (^IXIC) slid 9 points, or 0.3%, dragged lower by declines in big technology players including Netflix and Apple. Both Awesome Oscillator and the Alligator goes down even harder. 

Awesome Oscillator by Definition

The Awesome Oscillator provides us with the keys to the kindom.

The AO measures the immediate momentum of the past 5 price bars, compared to the momentum of the last 34 bars.

It is a 34 bar simple moving average of the bar's midpoints (H-L)/2 substracted from a 5 bar simple moving average of the midpoints (H-L)/2 plotted in a histogram form.

The AO tells us exactly what is happening with the current momentum.

Alligator and the Smoothed Moving Average

From original book:

Jaw Line (Blue): The balance line for the current time frame displayed on the chart. It is a 13 bar smoothed moving average offset 8 bars into the future.

Teeth Line (Red): The balance line for one significantly shorter time frame. It is an 8 bar smoothed moving average offset 5 bars into the future.

Lip Line (Green): The balance line for still one more significantly shorter time frame. It is a 5 bar smoothed moving average offset 3 bars into the future.


From www.CQG.com:

Definition: A smoothed moving average, referred to as Smooth, uses the current closing price added to the difference of the previous sum of closing prices in the lookback period minus the previous simple moving average value, and divided by the number of bars in the lookback period.

Example: The formula for a five-day smoothed moving average is:

Smooth = (Close(@) + ((Sum(Close(@),5)[-1] – MA(Close(@),5)[-1]))/5

The formula for the five-day smoothed average shows that the elements in the numerator are divided by 5, or each element is weighted by 1/5. On a percentage basis, this means each element contributes just 20% to the calculation. Therefore, the longer the lookback period, the smaller the individual weighting, and the slower the smoothed moving average will respond to the price action.

04/23 Awesome Oscillator: All going down

The Dow Jones industrial average (^DJI) ended the day down 102 points, or 0.8%. Awesome oscillator gives a clear signal that momentum has reversed from up to down.

The S&P 500 (^GSPC) shed 12 points, or 0.8%,

The Nasdaq (^IXIC) lost 30 points or 1%, moving significantly away from the Alligator.

04/19 Awesome Oscillators: NASDAQ goes down while Dow Jones and S&P 500 keep moving up slowly

The Dow Jones industrial average dropped 69 points, or 0.5%, with McDonalds and Alcoa dragging on the blue-chip index. Travelers and Verizon were the biggest gainers, as both companies topped earnings expectations.

The S&P 500 fell 8 points, or 0.6%, drop below the Alligator.

Nasdaq lost 24 points, or 0.8%. eBay was the best performer on both indexes, with shares surging more than 13%. The e-commerce company reported strong financial results for the quarter, and also raised its outlook for 2012.

04/18 Awesome Oscillators: All going up

The Dow Jones Industrial Average fell 83 points, or 0.6%, to settle at 13,033, just 5 points above its low for the session.

The S&P 500 sank nearly 6 points, or 0.4%, to close at 1385.

The Nasdaq shed more than 11 points or 0.4% to finish at 3031, recovering from a session low of 3024.

What is the Alligator?

The Alligator is a combination of Balance Lines using Fractal geometry and nonlinear dynamics.

The blue line that we call the Alligator's jaw is the balance line for whatever time frame is on the chart. The blue balance line is where the market would be if there were no new incoming informations (chaos). The distance between this line and the current price is an indication of how the traders interpret this new incoming information.

The red line represents the Alligator's teeth. It is the balance line for one significant time frame lower. Significant in this case is approximately one-fifth of the time frame on the chart. So, roughly, if the time frame on the current chart is a daily and refers to the blue line, the red line would approximate an hourly chart. Remember that these lines are simulations that were discovered and created by a mainframe computer with a confidence level of more than 99.5 percent. This confidence level means that you may miss not more than 1 out of 200 trades that would be created by a mainframe using nonlinear feedback calculus.

The green line represents the Alligator's lips. It is the balance line for still another significant time frame lower. Again, it would be approximately one-fifth of the time frame of the red line. So if the chart we are examining is a daily, the red line would approximate the hourly chart and the green line would approximate a 5 to 10 minute chart.

Why Not Do It Now?

Diogenes was a famous and very wise man. He found that owning things impaired his enjoyment of life. He narrowed his possessions down to only the clothes on his back and a bowl. Then one day he saw a dog drinking in the river and decided he really did not need a bowl.

He became famous throughout the land. So famous that the most powerful man in the world at that time heard of him. Alexander the Great went to the river where Diogenes spent much time to meet him. They struck up a conversation and Alexander was extremely impressed. Toward the end of this conversation Alexander said to Diogenes. "I admire you more than any man on the face of this earth. One day I would like to be like you. To really relax and know myself."

Diogenes asked, "Why not do it now?"

Alexander said, "No, I can't. First I must conquer the world and then I will come back here and we will spend much time together."

Diogenes replied, "I never conquered the world, why don't you stay now?"

Alexandar answered, "No, first I conquer the world, then I will come back."

Diogenes said, "You will never come back, you will die first."

Alexandar did finish conquering the known world. His last conquest was India and sure enough he died on the way back from India.

The Path of Least Resistance

The path of least resistance describes the physical or metaphorical pathway that provides the least resistance to forward motion by a given object or entity, among a set of alternative paths.

The concept is often used to describe why an object or entity takes a given path. In physics, the path of least resistance is always taken by objects moving through a system. For example, water flowing downhill follows the path of least resistance as it is pulled downward by gravity. Atmospheric disturbances (storms) flow on the path of least resistance by flowing toward zones of low barometric pressure, where lower air density offers less impedance to the storm system than higher pressure zones.

• Energy Always Follows the Path of Least Resistance

In a market, you will exit from a losing trade when the pain of losing one more dollar becomes stronger than the pain of saying that you were wrong in taking the trade. The path of least resistance wins again.

• The Path of Least Resistance Is Determined by the Always Underlying and Usually Unseen Structure

The underlying structure of your life determines your approach to trading. Whether you are aware of the structure or not, it determines your behavior and your reaction to any movement in the market.

• The Always Underlying and Usually Unseen Structure Can Be Discovered and Can Be Altered

You can change the flow of your life and your trading. To do this easily and permanently, you must work with the underlying structure rather than the behavior produced by that underlying structure.

Once a new and different structure is in place in your trading, the overall thrust of your trading, like the current of a river, builds momentum and aids you in getting the results you want.

The Simplicity of Markets

You remember Fred Flintstone, a rather rough and outdoors kind of guy, and his more domestic next-door neighbor, Barney? Fred sees himself as a macho he-man who likes to hunt dinosaurs. One day he goes out and kills a big somethings-a-saurus even though this freezer is already full of dinosaur hurgers. Barney does not enjoy hunting and killing but he likes eating dinosaur Whoppers. Barney prefers to sit around his backyard whittling wood and making clubs. Fred rarely takes time to make his own clubs.

Fred wanders over to Barney's backyard and gets an idea. Why not swap Barney a couple of platters of dinosaur burgers for that new club he is finishing. So he puts this proposition to Barney: "Barney, I'll give you two platters of dinosaur Whoppers for that new club. How about it?" Barney says, "OK, you got a deal."

Fred and Barney have just created a market. It is just that simple! Both Fred and Barney valued what they wanted more than what they had. To Barney the burgers were more important (valuable) than the club he was making, and to Fred the club was more valuable than the burgers.

All Markets are Created When Two or More People Have an Equal Disagreement on Value and an Agreement on Price.

Awesome Plot App

The Awesome Plot App features Alligator charts for Dow Jones, NASDAQ etc. on iPhone and iPad. It is not available on AppStore, please feel free to leave your comments or any inquiries.

The World is What You Think It Is

There is a Hollywood actor who likes to get away to his cabin in the mountains each weekend. He drives there over curvy, mountainous dirt roads. He usually drives his Porsche convertible and enjoys seeing how fast he can take the curves. He rarely meets anyone on these roads because there are few cabins in the area and even fewer visitors.

One Friday afternoon as he zooms through these curves, he meets an oncoming car that has careened over into his lane. There is a substantial cliff to his right, so he brakes his Porsche as hard as he can and stops just before a head-on collision.

The other car is also a convertible. The driver pulls around his stopped Porsche, she guns her engine, points, and shouts "PIG." This puzzles him. He was in his lane, it certainly wasn't his fault, and he was not "hogging" the road. As she drives off in a cloud of dust, he turns and shouts loudly, "SOW!"

Now he is fuming. He floors the accelerator, gains speed around the next curve, and collides with a large hog standing in the middle of the road.

How Do I Become Enlightened?

There was a student in India who wanted to become enlightened. He left his family in search of an appropriate guru to guide him further on his journey. Stopping at one guru's place of business, he inquired as to this guru's method of becoming enlightened. The guru said, "Becoming enlightened is really quite simple. All you need to do is to go home each night and sit in front of a mirror for 30 minutes asking yourself the same question over and over. That question is: 'Who am I? Who am I? Who am I?'" The prospective student replied, "Hey, it can't be that simple."
"Oh yes, it is just that simple," replied the guru, "but if you would like a second opinion, there are several other gurus on this street."

"Thank you very much," said the student, "I think I will inquire down the way."

The student approached the second guru with the same question. "How do I become enlightened?"

The second guru replied, "Oh, it is quite difficult and takes much time. Actually, one must join with like-minded others in an ashram and do sava. Sava means 'selfless service,' so you work without pay."

The student was excited; this guru's philosophy was more consistent with his own preconceived view of enlightenment. He had always heard it was difficult. The guru told the student that the only job open at the ashram was cleaning out the cow stalls. If the student was really serious about becoming enlight ened, the guru would allow him to shovel all the dung and be responsible for keeping the cow stalls clean. The student accepted the job, feeling confident that he must be on the right path.

After five long years of shoveling cow dung and keeping the stalls clean, the student was becoming discouraged and im patient about enlightenment. He approached the guru and said, "Honored teacher, I have faithfully served you for five years cleaning up the dirtiest part of your ashram. I have never missed a day and have never complained once. Do you think it might be time for me to become enlightened?"

The guru answered, "Why yes, I believe you are ready. Now, here is what you do. You go home every night and look yourself in the mirror for 30 minutes, asking yourself the same question over and over. That question is: 'Who am I? Who am I? Who am I?'"

The very surprised student said, "Pardon me, honored one, but that is what the other guru down the street told me five years ago."

"Well, he was right," responded the guru.