05/26/2012 Weekend Discussion

[BullBear52x]

GLD traps in the basement
SLV about to beak out
UUP there's signs of Negative D
all and all nothing confirmed. Too much coffee in me this morning

[Al_Dente]

CHINA HARD, SOFT OR MEDIUM ?

We call ours “LIBOR,” the one month interbank borrowing rate. It’s half of our favorite $TED spread; it tells us how tight/easy credit is,
and many use it as an excellent thermometer of our economic health.

Good luck finding much data in gringo english relating to BANKS and CREDIT out of opaque China. Here’s one transparency they call “SHIBOR”
the Shanghai interbank rate “the rate at which Chinese banks say they can borrow from one another” three months.
Bloomberg quotes it here daily: http://www.bloomberg.com/quote/SHIF3M:IND

According to Bberg, 16 banks give daily quotes to create the SHIBOR, and the fix is published every morning.
(It currently shows a “waning demand for loans”).
Only one of these 16 banks trades on our U.S. exchanges: BACHF Bank of China Beijing (penny stock on the pink sheets !!!).
So Bloomberg’s SHIBOR may be an important ticker to follow, especially if you believe that the 16 banks are telling the "truth" …

[Al_Dente]

...Oil chatter, gann chart, Iran is the wild card, etc…
http://oilprice.com/Energy/Oil-Prices/C ... -2012.html
...

I insert ^CLK12 in this 42/31 magic of mine, my USO magic 31 still looking down.

Hi boss, thanks I luv your magic chart and I agree.
But my weekend “notes to self” on UCO/SCO charts say: don’t short oil here SHORT TERM…blabla….
WDIK what do I know…but my charts are much smarter than I am.
Note $WTIC is looking like a megaphone on the daily.
Bulkowski calls the megaphone pattern “broadening bottom” http://thepatternsite.com/broadb.html

Commodities and the dollar are still following the rules (as u well know, generally: dollar up = commodities down).
For me it’s best not to fight the dollar until she decides to turn…not just overbought…. she’s gotta TURN…
[I know that’s contradictory information; it’s meant to be…]

I’m busy studying Dr. Copper now, see u later…
“Copper Surplus” The demand for copper in China is now so low, that some suppliers have been forced to store unsold stockpiles of the metal in parking lots. But demand may pick-up following the new economic stimulus plans announced by China’s Premier Wen Jiabao.
http://www.reuters.com/article/2012/05/ ... 1U20120522

Performance chart of the top copper stocks, and the biggest copper consumer (China).

“There's a way to do it better - find it.“ [Thomas A. Edison]

http://www.youtube.com/watch?v=yeRTxWCI ... re=related

[xfradnex]

Hello weekender, here's some thing on my corner before long weekend kick back.

Many short term indicators are showing some signs of life (more at my blog) but 1330 is key line, momentum is very optimistic but price pays, so I want to see 1330 taken back by bulls before going bullish.

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Trend change will not occurred until 1330 is taken back.

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for weekly breadths, RED is the last color, so, here too, suggests more work is required to get the bull going.

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see MO buying from the low but price action saying very little.

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Intraday suggests evil on...enjoy your weekend.

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Play out ? What do you think (good news green, neutral news purple, bad news = Blue). It seems that there is a period of around 5 to 6 hours of channel time, then a move.

[Al_Dente]

PS: Bubba Ganesh bb52:
COT commitment of traders, silver = bottom/near bottom………. no??...............
But I can’t go there yet either; I’m always late to the party

[BullBear52x]

Play out ? What do you think (good news green, neutral news purple, bad news = Blue). It seems that there is a period of around 5 to 6 hours of channel time, then a move.

Lines? here is another corner of lines.

[BullBear52x]

PS: Bubba Ganesh bb52:
COT commitment of traders, silver = bottom/near bottom………. no??...............
But I can’t go there yet either; I’m always late to the party

SLV is the most positive of them all, check out daily candle formation, bullish bottom of sort. GTG later....

[iamtom07]

Cobra, can you tell me how to vote and follow? Should I register stockcharts first?

Good morning Cobra
Please post yr prominent link and remind us to vote 1) Saturday 2) Sunday 3) Monday
Have a great weekend

Please vote for me and better yet follow me: http://stockcharts.com/public/1684859

[Al_Dente]

“CONFIRMATION BIAS”
[Lifted from the book: “The Science of Fear: Why We Fear the Things We Shouldn't…” by Daniel Gardner, available via Cobra’s amzn link]

“Confirmation bias” is a cognitive bias that scientists and psychologists have studied for decades, and in all cases they’ve found that we try to confirm our preconceived beliefs by looking for examples that fit our views. Once we have formed a view, we embrace information that supports that view, while ignoring or rejecting any information that casts doubt on it. Once a belief is established, our brains will “naturally” seek to confirm it.

Almost four hundred years ago Sir Francis Bacon wrote that “human understanding when it has once adopted an opinion…draws all things else to support and agree with it. And though there be a greater number and weight of instances to be found on the other side, yet those it…neglects and despises… sets aside and rejects…”

[It’s interesting to watch it in action here on this board, when we cleave to charts that support our bias, and we have a strong tendency to ignore or belittle any chart or information that opposes our bias.]

ANY belief will cause confirmation bias to kick in, “and incoming information is screened: if it supports the belief, it is readily accepted; if it goes against the belief, it is ignored, scrutinized carefully, or flatly rejected…”

One study showed that “..when people processed information that ran against their bias, they actually used different parts of the brain than they did when they processed neutral or positive information...” Studies concluded that it is “natural” to seek confirmation and that confirmation bias “really is hardwired in each of us, and that has enormous consequences for how opinions survive and spread…”

What happens when people who share a belief get together to discuss it? [on this board for example]. “Psychologists know the answer to that, and it’s not pretty. They call it group polarization…. research has proved that groups usually come to conclusions that are more extreme than the average view of the individuals who make up the group.” In other words, if we gather here to discuss a rally or decline, the “group-think” will take it to the extreme, and we leave the group believing that we had previously underestimated the situation, and that the rally/decline will go further than we originally believed. “The dynamic is always the same…It doesn’t matter what the particular views are. When like-minded people get together and talk [blog], their existing views tend to become more extreme…Every person in that meeting is prone to accepting information … [that confirms their bias]… As a result, the information that is pooled at the meeting is deeply biased…”

*******************************************************
The “takeaway” for me in terms of trading (IMHO) is this: if I am bullish on XYZ, I try to fight my “cognitive bias” and study the opposing point of view,
as I might learn something. And the more I can absorb conflicting views, and stay less rigid about being “right,” the easier it is for me to recognize when I am wrong, and exit quickly, and move on…

[Interestingly, Taggard nailed it in his post Friday: “…one sure way to improve trading is to sustain two ideas at once that happen to be inversely related … simply think both things… invert everything you can get your hands on…”]

[Cobra]

Cobra, can you tell me how to vote and follow? Should I register stockcharts first?

Good morning Cobra
Please post yr prominent link and remind us to vote 1) Saturday 2) Sunday 3) Monday
Have a great weekend

Please vote for me and better yet follow me: http://stockcharts.com/public/1684859

You have to be a member of StockCharts first. It's a paid services, so if you're not member, that's OK, no need to vote, just click the link once everyday also helps me a lot. Thanks.

[Cobra]

Futures gap sharply. I think this is the 4th push up of the "n push up" pattern. How it tests the trend line above will be interesting to see.

[taggard]

[quote="Al_Dente"]“CONFIRMATION BIAS”
[Lifted from the book: “The Science of Fear: Why We Fear the Things We Shouldn't…” by Daniel Gardner, available via Cobra’s amzn link]

“Confirmation bias” is a cognitive bias that scientists and psychologists have studied for decades, and in all cases they’ve found that we try to confirm our preconceived beliefs by looking for examples that fit our views. Once we have formed a view, we embrace information that supports that view, while ignoring or rejecting any information that casts doubt on it. Once a belief is established, our brains will “naturally” seek to confirm it.

Almost four hundred years ago Sir Francis Bacon wrote that “human understanding when it has once adopted an opinion…draws all things else to support and agree with it. And though there be a greater number and weight of instances to be found on the other side, yet those it…neglects and despises… sets aside and rejects…”
---------------------------------------

al notes The “takeaway” for me in terms of trading (IMHO)--and this is where i think the real action starts. Confirmation Bias is an attempt by western science to discuss one small application of perception. we try to reduce things to explain them. we try to be exclusive (to exclude) rather than to be (inclusive) to include. so because it's a holiday lets take the idea and run with it.

First all trading is based on your "mind" and "brain" (your brain is the actual anatomical structure--and your mind is the 2-5% you are aware of on a good day. So this idea of Confirmation Bias is global to our experience of life. For example--most people assume they are discreet anatomical structures that more or less stops at the skin and everything else is outside one. But if you take this same person and place him in an isolation tank under ideal circumstances he will in about 20 min lose all sense of time and place (at least on his first time in) and his thinking will get very odd. this is one reason solitary confinement is a punishment in prisons.

what this tells us is to some extent we are dependent on outside information to be who we are. so our first mistake is that we actually think we are stand alone entities which "make decisions" that are somehow distinct from our location in time space age and society as well as experience. decisions are not made that way.

second we are very plastic as the Stanford Prison Experiments showed. Here a group of under grades (tested for obvious psycho pathological issues so some what baseline for standford undergrads). at random half were designated guards and half prisoners. prisoners were locked in "cells" in the basement of the psych building and the idea was to study the interaction over time. the experiment had to be broken up after a short period as the "guards" where trashing the prisoners and the prisoners were rebelling etc.

so pretty much the illusion of self broke down and people started to become what they were acting out. From this we get the idea that our illusion of solidity of "self" is a delusion.

so now you have "we don't know where we end and where we start in a physical sense" and "it's pretty clear the "outside" situation is having a huge impact on the inside situation"

so as you can see "confirmation bias" starts to look pretty out there in this context.

the next problem is what is even possible for our brains to do--since we know we are only aware of a very small part of our mind and bodies at any one time. and that is plenty out there too. For example natives in south american jungles were able to figure out how to mix two plant compounds together to get a desired outcome with no science in one of the most densely (species wise) plant covered areas in the world. when asked they said the plants talked to them on the full moon. natives sailing from Tahiti to Hawaii (hawaill was settled this way) were able to feel the currents of the ocean trough the bottom of the boat when they could not navigate by the sun stars or what have you.

if any of us was placed in these situations we would likely not be able to do this and in fact would rely on statistics to "prove" people can't do these things. But some people can--hunting with indigenous peoples is pretty intense in various places as they can tell from 20-60 feet from smelling urine what species and sex and sometimes the age. Odds are you lack this skill set and if asked would claim it was unlikely to exist. How many other learned or inherent skills or abilities like this are in you?

we could continue with this but what i am trying to do is fit confirmation bias into the largest possible context and suggest that traders look more at their personal lives outside trading which in fact define all their trading--as opposed to looking directly or at least only directly at the trading. We are starting with an idea of “self” which is clearly delusional a lot of the time--and then making habitual distinctions about--that which we consider "outside us" and then taking the result as "truth". amusingly anyone who doesn’t buy into our ideas is clearly delusional. And anyone who does is a “smart dude”.

one key problem is the idea there is only “one truth”--this is also a localized belief and there are weird twisted cultures (physics as well as people who dress cool and live in other countries) who don't believe this. so when looking at a chart--there is not a "correct way" to look at it. there is not "a correct way to trade" and there is not even one trade since people can trade the same chart in the same time frame or the same charts in different time frames inversely to you and make as much or more money.

like they used to say "the truth is out there" except actually "the truth is in there" also.

so what to do with all this. what you have to start with is--the idea that you cannot understand what your bias is--and hunt it like an animal in the jungle. this is why they make journals and spread sheets. watch your self very carefully and you will start to see things you didn't realize exist. by all means watch the exact trade stuff (so charts spreads entry exits etc) but the real action is in your beliefs moods feelings all that messy stuff. (this is why journals use text--humans cannot be understood in their entirety by an excel spread sheet even with a lot of space on the right side of the decimal point.

once you spot patterns you can start by trying to invert them--but if you have the patience--start looking behind them not just playing them on the surface but looking for a more 3d picture.

the most important thing for dealing with stuff like confirmation bias--is starting to accept the inverse of this which is being confused and clueless. and that is what everyone is trying to avoid which is why confirmation bias is so strong. The sense is we need to be decisive and "know what we are doing" but the fact is despite our delusions we mostly don't.

everything i have experienced as well as everything i remember reading and hearing from people--seems to indicate that you are going to have to be confused to give up "knowing what you are doing". and most people simply do not want this discomfort. not only trading but in their day to day lives.

so they wind up constructing some nice reasonable reality and fitting the world to themselves.

inverting your thinking--trying new things--looking at stuff from radical angles--trying as hard as you can to take something away from beliefs you consider odd. if you are a science guy grasping what is true in spiritual stuff--and if you are a spiritual guy grasping the science stuff is all a good place to start. really listening to other people music writing etc--real listening so not coming to a "conclusion" or looking for the depth under that conclusion--why is this person place or thing like this is good too.

my personal favorite is absolute mediation which is hands down the hardest thing i have done in life. learning meditation usually involves narrowing focus to one thing (such as ones breath--a symbol--sound--even movement). but this is only step one--step two is to discard this one thing. this is insanely hard as you cannot even use your intent to do the exercise as that would be . . .sigh (double sigh) one thing.

doing even basic "one thing" meditation will blow you away as you see just how much "interior dialogue" and weird "floatsam and jetsam" you have in your "mind". and see how powerless you are to control it. don't fight it just keep going back to that one thing as gently as you can. the object is stillness--not forced concentration and relaxing is absolutely key. Hitting even 1-3% effective at this stuff will yield huge results. getting hot seems to take decades (serious improvements in % effective seem to be in the 1500-5000 hour area. the effect is cumulative and compounds--so it's a grind and then gets better.

as you do this you will see conformation bias--in 3D (without the shades). the first sign of progress is a gap in between the words or images. the second sign of progress is "lost time" so you just come out of the zone and 5-10-20 whatever min is gone. as this happens watch what happens to the charts--you will see a whole lot more in each chart--and time may seem slightly different.

if you are really concentrating time tends to seem slower--it's not really you are just experiencing more during the interval under discussion. i personally think this implies using fewer charts--and fewer indicators because you will get the same information out of more concentrated focus on one indicator. but that is just a personal preference.

Bottom line is confirmation bias is multi leveled layered and multi dimensional beast in your life. it is something that you are creating and it obscures like "dust on a mirror". trading is a subset of your life. you can use one to change the other in either direction--but beware thinking the whole game ends with inverting a trade idea. you certainly can do this and benefit--but if you care to you can do a whole lot more. after all is trading an end in itself or what you are doing to get to some end? since where ever we go there we are (we are not escaping the bias by changing the outside world only shifting tiny parts of it) there maybe some value to considering the idea in it's largest possible context.

good luck with your trading

[Petsamo]

I traded my X for Russia (RSX). I hope the comrades don't screw me up.

[taggard]

George Soros (Net Worth $22 Billion) - ”I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”

Ray Dalio (Net Worth $6.5 Billion) – “More than anything else, what differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively.”

T. Boone Pickens (Net Worth $1.4 Billion) - “The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.”

Charlie Munger (Net Worth $1 Billion) – “If you took our top fifteen decisions out, we’d have a pretty average record. It wasn’t hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor.”

David Tepper (Net Worth $5 Billion) – “This company looks cheap, that company looks cheap, but the overall economy could completely screw it up. The key is to wait. Sometimes the hardest thing to do is to do nothing.”

Louis Bacon (Net Worth $1.4 Billion) – “As a speculator you must embrace disorder and chaos.”

Paul Tudor Jones (Net Worth $3.2 Billion) - “Were you want to be is always in control, never wishing, always trading, and always, first and foremost protecting your butt. After a while size means nothing. It gets back to whether you’re making 100% rate of return on $10,000 or $100 million dollars. It doesn’t make any difference.”

John (Jack) Bogle (Net Worth $4 Billion) - “If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”

[silicon_beaver]

Futures gap sharply. I think this is the 4th push up of the "n push up" pattern. How it tests the trend line above will be interesting to see.

Now, ES 1322 level has been broken. to test 1329.75.

[btran874]

Futures gap sharply. I think this is the 4th push up of the "n push up" pattern. How it tests the trend line above will be interesting to see.

Now, ES 1322 level has been broken. to test 1329.75.

With some luck, by the time the market opens on Tuesday we might gap down.

[Cobra]

all the overnight gains are gone. The pattern looks more and more like my famous "n Push Up" with the last attempt to make a new high failed, so chances are that 2 legs down are on the way.

[Cobra]

DAX failed another test on the H&S Top neckline, not looking good.

[Cobra]

wild-est-est-est guess for TSX. Is an ascending triangle, so should be more up but also it could be "n Push Up" so chances to fail eventually are higher.

[SigmaEcho]

gm Cobra.