Memo from the Chief Economist: Lament of a Bear | David Rosenberg

One can reasonably debate whether the stock market has risen exponentially but there is no arguing that the surge in the S&P 500 these past two years has been nothing short of extraordinary. And it has clearly gone much further than I thought it would, especially in these past twelve months, and so at this point, it is worth the time and effort to discuss and interpret the message from the market.
 

 » Smells of capitulation. «

The bottom line: Tip the hat to the bulls who have, after all, been on the right side of the trade, and provide some rationale behind this powerful surge. This is not some attempt at a mea culpa or a throwing in of any towel, as much as the lament of a bear who has come to grips with the premise that while the market has definitely been exuberant, it may not actually be altogether that irrational. Read on.

Quoted from:
David Rosenberg (December 6, 2024) - Memo from the Chief Economist: Lament of a Bear. 

 

See also:

Tom McClellan (December 6, 2024) - Presidential Cycle Effects with a New President.
Steve Miller (December 5, 2024) - S&P 500 Cycle Analysis - Time and Price Projections Update.

BlackRock Investment Institute (December 4, 2024) - Due to 'Mega Forces': No More Bust, Only Boom. Outlook 2025.

Jeffrey A. Hirsch (December 4, 2024) - December Stock Market Performance in Election Years. 

Tom DeMark (November 18, 2024) - US Stock Market Nearing a Top Similar to 1929.
Lars von Thienen (November 1, 2024) - The 41-Month Kitchin Cycle Topping Patterns in US Stocks.
Richard Smith (October 29, 2024) - Equities Endgame? Spectrum Cycle Analysis of US Indices.

D'onte Goodridge (2024) - Structural Characteristics of Bullish and Bearish Months.

The 24 Chinese Solar Terms in 2025 │ Winter Begins Today ( 立冬 - Lì Dōng )

 Winter begins on November 7, which is 225° from the Vernal Equinox (0° Aries). 

This is what W.D. Gann referred to as a Natural Trading Day. 225° represents 0.618 of the solar year.

 

A solar term ( 節氣 ) is one of twenty-four periods in the traditional Chinese lunisolar calendar, each corresponding to a specific astronomical event or natural phenomenon. Starting from the spring equinox, these points are spaced 15 degrees, or roughly 15 days, apart along the ecliptic and are used by lunisolar calendars to remain synchronized with the seasons.

 Changes in trend often occur every 30° as the Sun moves into the next sign of the zodiac.

30° roughly equals one month, 30 calendar days or 21 trading days.

 

W.D. Gann knew that the astronomical year begins on March 21st and that this was also a very important seasonal time for financial markets. He used geometrical divisions of the solar year (degrees of solar longitude as well as calendar days) to ascertain turning points. Changes in trend often occur every 30° as the Sun moves into the next sign of the zodiac.

 

Dates at 45°, 90°, 135°, 180°, 225°, 270°, and 315° solar degrees from the Vernal Equinox (0° Aries) are what Gann called Natural Trading Days, with 225° representing 0.618 of the solar year (November 7). Though 15°, 22.5° and 45° also may coincide with changes in trend, Gann stressed the importance of the cardinal points (90° apart). He also used multiples of 90° and 144°, i.e., 90°, 180°, 270°, etc., and 144°, 288°, 432°, 576°, 720°, etc. 

  

Reference:
Tianbao Zhou, Xinghao Li & Peng Wang (2021) - Chinese Stock Indices, Gann Time Theory, and Solar Terms.

 

Combining the Chinese Solar Terms and Gann astro-methods for market timing with the following concepts may further increase the probability of accurately pinpointing market turns:

 

 Seasonality.

 

Cosmic Cluster Days.

 

Sensitive Degrees of the Sun.

  SoLunar Rhythm.

 

Principle of Contraction/Expansion.

Swing Points as Trend Change Indication.

Price Action Patterns & Entries at High and Low of the Day | Cameron Benson

Our focus is on price action trading at key levels: daily high and low, and the previous day's extremes. We examine how price reaches these levels — through Stair-Stepping or Ramping — and its subsequent behavior. The price action patterns include M's, W's, Double Tops/Bottoms, and Pin Hammers at daily highs and lows. 

 

 Stair-Stepping and M Patterns: These indicate potential reversals at daily highs or lows, 

with detailed entries and exits often managed through lower time frames.

Ramping is characterized by parabolic price movements and often leads to swift reversals. Observing tight candle patterns with minimal overlap helps identify strong trends and potential breakouts. We also look for specific patterns like Stair-Stepping and Three Pushes, with Peak Formations signaling possible reversals.

 

 Ramping Behavior: Recognized by tight, parabolic moves followed by rapid reversals. 

The ramp into extremes usually signals significant price shifts.

The following 5 minute charts of the NASDAQ are from last week (September  9-13, 2024). They show Entry and Exit Strategies, using Pin Hammers and Engulfments for Entries, and managing stops based on price action, with adjustments for larger, more volatile bars.

Monday, September  9 (Day 1 of 3 Day Cycle):

 

 Identified an M pattern at the high of the day with a pin hammer and engulfment, suggesting a strong short entry.

Tuesday, September  10 (Day 2):

 

Despite a promising setup, a large entry bar resulted in a stop-out. 

Emphasis on avoiding large entry bars and managing risk.

 

Wednesday, September 11 (Day 3/1): 

 

 Similar to previous days with M patterns and engulfments, also highlighting entry points and risk management.

Thursday (Day 2) and Friday (Day 3), September 12-13:

 

 Charts show patterns like descending triangles and W formations, 

with a focus on understanding price behavior relative to session timings.

 

Successful short-term trading relies on recognizing and acting upon the above presented price action patterns, managing entries and exits based on contextual behavior, and adapting strategies according to the specific market conditions within the 3 Day Cycle.

 

Reference:
Cameron Benson (September 14, 2024) - Price Action High And Low Of The Day (Day Trading Entries)(video) 
Cameron Benson (September 14, 2024) - Price Action High And Low Of The Day (Day Trading Entries)(pdf)
Cameron Benson (June 16, 2024) - The Complete 3 Day Cycle Short-Term Trading System.

Stacey Burke (December 5, 2023) - The Three Day Cycle & Parabolic Trade Setups.
Cameron Benson (August 20, 2023) - Three-Push Reversal Patterns.

 Richard D. Wyckoff (August 30, 2024) - Re-Accumulation & Re-Distribution Range Patterns.

Richard D. Wyckoff (December 21, 2022) - Accumulation & Distribution Schematics.  

Toby Crabel’s Bull Hook Trading Strategy Tested | Ali Casey

As an algo trader, I value patterns for their ease of programming and testing, which allows for the development of robust trading strategies. Today, we'll explore bull and bear hooks, patterns that can vary in details but generally serve to catch traders on the wrong side. Toby Crabel, Joe Ross, and Thomas Bulkowski, among others, have variations of these patterns.

Toby Crabel's original definition of the Bull Hook pattern:

» A Bull Hook occurs on Day 2. A Bull Hook is defined as a day with a higher open than the 

previous day's high followed by a lower close with a narrowing daily range. The next day (Day 1), 

a trade is taken on the initial move off the open, preferably to the upside. «

 

Toby Crabel's original definition of the Bear Hook pattern:

  » Bear Hook is a day in which the open is below the previous day's low and the close 

is above the previous day's close with a narrow range relative to the previous day. As implied by 

the name there is a tendency for the price action following a Bear Hook to move to the downside. «

The Bull Hook pattern has two main forms:

Bull Hook 1: In a downtrend, the pattern is identified when today's bar is an up bar with a smaller range than the previous day and is an inside day (high lower, low higher than the previous bar). We buy with a stop order above the high of this bar.
Bull Hook 2: Here, today's bar is a down bar with a smaller range than the previous day, opening above the previous high and closing below the previous close. This pattern involves just two bars.

For testing, I used TradeStation with S&P 500 e-mini futures data. The backtest for Bull Hook 1 was disappointing, showing a loss with only 15 trades, which seemed unusual given its pullback nature. A deeper analysis suggested that the specific conditions, particularly the inside day and green bar requirements, were limiting trades. By removing some conditions, like the inside day and green bar, and focusing on a simpler pullback strategy, the results improved significantly with about 200 trades and positive performance metrics. For Bull Hook 2, the test also yielded fewer trades than expected, which might be attributed to its breakout nature, not performing well on the S&P 500. Simplifying the conditions here also improved the results somewhat, though it remained less effective. The Bear Hook pattern, when flipped for long trades, performed better but still had a low trade count. Removing some conditions and simplifying it increased the trade count and improved performance. While both Bull Hook patterns had potential, their effectiveness was highly dependent on specific conditions and the number of trades generated. Simplifying the patterns often led to better results.

Reference:
Ali Casey (July 28, 2024) - The Secrets of Toby Crabel’s Bull Hook Trading Strategy Exposed. (video)
 Toby Crabel (1990) - Day Trading With Short Term Price Patterns And Opening Range Breakout.
MyPivots.com (2024) - Scanner for Toby Crabel Price Patterns in the E-mini S&P 500 Futures. 

 

See also:

Thomas Bulkowski (2013) - Hook Reversal, Uptrend.

 Thomas Bulkowski (2013) - Hook Reversal, Downtrend.

Joe Ross (1991) - Trading the Ross Hook.

Slava Loza (2021) - How to Trade the 1-2-3 Reversal and the Ross Hook Patterns.

Thomas Bulkowski on Hook Reversals in an Uptrend and in a Downtrend.

Recent Toby Crabel Price Pattern Setups in the E-mini S&P 500 Futures

 S&P 500 E-mini Futures (daily candles) - (1) - (2) - (3) - (4)

(1)   2BNR is the 2 Bar Narrow Range: If the 2-day-range (the higher of the 2 highs less the lower of the 2 lows) is the narrowest 2-day-range in the last 20 trading sessions then we are currently sitting on a 2BNR.
(2)   3BNR is the 3 Bar Narrow Range: If the 3-day-range (the higher of the 3 highs less the lower of the 3 lows) is the narrowest 3-day-range in the last 20 trading sessions then this is true.
(3)   » Next time you see an Outside Day with a down close lower than the previous day, don't get scared, get ready to buy ! «
(4) 4BNR and Inside Day with an Up-Close -  narrowest weekly range of last 7 ... weekly directional change already due? ... or early September?

Reference:
Toby Crabel (1990) - 2-Bar Narrow Range Setup.
Toby Crabel (1990) - The Principle of Contraction/Expansion.
Toby Crabel (1990) - Definition of Price Patterns.
Larry Williams (1998) - Outside Bar Trading Setups.

Larry Williams (1995) - An Outside Look at Inside Days.

D'onte Goodridge (2022) - Interbank Price Delivery Algorithm (IPDA) Data Ranges.

D'onte Goodridge (2023) - Structural Characteristics of Bullish & Bearish Months.

TPR (July 25, 2024) - Cosmic Cluster Days | August 2024.

Martin A. Armstrong (July 14, 2024) - Next weekly directional change during week of August 26.

MyPivots.com (2024) - Scanner for Toby Crabel Price Patterns in the E-mini S&P 500 Futures.

 

Trading Major News Events | D'onte Goodridge

News events typically inject momentum into the market, often prompting traders to anticipate where price might trend in response to the news. Making educated predictions about these movements is a common strategy rooted in technical analysis. Position yourself AFTER major news releases (NFP, CPI, PPI, PMI, FOMC etc.) with either a Pump & Dump or a Dump & Pump trading setup.

Sell Scenario/Setup: Wait for the buy side liquidity pool on the 15 minute timeframe to be raided first. After that, go to the 1 minute timeframe entry above the killzone's opening price. Then, anticipate that price will revert back down to a sell side liquidity level.

 

 

Buy Scenario/Setup: Wait for the sell side liquidity pool on the 15 minute timeframe to be raided first. After that, go to the 1 minute timeframe entry below the killzone's opening price. Then, anticipate that price will revert back up to a buy side liquidity level.

 

When price moves above the opening price of a killzone, it's in a premium. This is where to find ideal sell entries. 

When price moves below the opening price of a killzone, it's in a discount. This is where to find ideal buy entries.

Reference:
D'onte Goodridge (July 14, 2024) - Trading News Events. (video)

 

 Major news July 15–19 (UTC -6).

Structural Characteristics of Bullish and Bearish Months | D'onte Goodridge

Traders want to find trending markets but often fail to see and understand the structural characteristics of bullish and bearish months. Both move in a similar fashion but inverse to one another. Here are the characteristics for the formation of a bullish month:

 

 

The first example is a daily chart of US Dollar versus Japanese Yen (USDJPY) during February 2023. The market was trending up. It was a bullish month. Let's identify the five key factors to a bullish month:

1. Price moves below the monthly opening price.
2. A swing low forms below the month's open.
3. Price purges a previous daily low (PDL) and reverses back to a previous daily high (PDH).
4. The market creates a market structure shift (MSS) to the upside and an Imbalance or Fair Value Gap (FVG).
5. Higher swing highs and higher swing lows form.

 

Looking at the daily candles in the USDJPY chart, we see the methodical sequence of a Bullish Month developing:
 

1. Price was movesg below the monthly opening price. Price stops below it, runs up, drops below it, runs up and continues the bullish trend.
2. A swing low below the month's open forms. This is a swing low because the candle on the left has a higher low and the candle on the right has a higher low, hence the low in the middle is the lowest point. To form a swing low  only takes three bars.
3. Price purges a previous low and works back to a previous high. The following day price reverses back to the previous daily high, all happening within a three bar setup, creating a swing low, which is a purge on the previous daily low and a reversal back to a previous daily high.
4. Next the market creates a shift to the upside with speed through a previous swing high and a FVG.
5. And price created a new swing high and a higher swing low.

The next example is a daily chart of Apple during January 2023. The same five criteria for a Bullish Month were met:

 

Now let's look at the five key factors to a Bearish Month:

1. Price moves above the monthly opening price.
2. A swing high forms above the month's open.
3. Price purges a previous daily high and reverses back to a previous daily low.
4. The market creates a shift to the downside and a FVG.
5. Lower swing highs and lower swing lows form.

 

The first example is a daily chart of British Pound versus US Dollar during August 2022. The market was trending down. Identify the above listed five criteria for the formation of a Bearish Month:

 

 

The last example is a daily chart of Gold during February 2023. Gold was in a down trend. Identify the structural criteria for the formation of a Bearish Month:

 

Reference:
D'onte Goodridge a.k.a. Forensic Forex (2023) - Characteristics of Bullish & Bearish Months. (video)  

 

 

 

See also:
Larry Williams (1998/2011) - Long-Term Secrets to Short-Term Trading, 2nd Edition.

 Michael J. Huddleston (2017) - ICT Weekly Range Profiles.

Daye (2023) - The Quarterly Theory.

 

The Oops! Reversal Setup | Larry Williams

One of Larry Williams’ best-known setups is called Oops!: We are waiting for the market to open. We take as a reference the daily bar of yesterday, with its open, evolution and close. When the market opens, suppose a gap up occurs. A gap up takes place when the open is higher than the highest point that was reached on the previous day; a gap down occurs when the open is lower than the lowest traded point of the previous day.

When a market opens at a very high level and there is a gap up, it is very strong. So, we obviously suppose that it goes up. It will probably do it but, if for some reason it starts to fall and then reaches the highest level of yesterday, it is as if it said: "Oops!, I was wrong. I’m not strong, but weak." In this case, we open a short position at this level. We enter short because we imagine that the market (and the players in the market) realizes it isn’t that strong. Actually, the market is weak, so it will go down. 

To use this setup, we obviously need a stop-loss whose size depends on the market we are trading. How do we close this position? Larry Williams proposed a bailout exit he called "first profitable open". This consists in staying in the position until, on the following day or days, the market opens somewhere below the entry level (because we are short). When that happens, we close the trade. So, we keep the position until we get the profit or, obviously, when we are stopped out. We can also close the position at the end of the same day. The one suggested by Larry Williams is however the best one, although it sounds quite weird. Believe me, the first profitable open is a very effective close of the position.
 

This is the basic version of the Oops! Anyway, I know Larry Williams made some tweaks to it. The Oops! works, but today this specific setup is quite rare. The reason is that many markets trade for 23 hours a day now. So, it’s quite hard to have a heavy gap in just one hour. Maybe, you can have one after the weekend, but normally it’s not there.

Quoted from:
Andrea Unger (2017) - How to Trade Larry Williams’ Oops!

See also:
Larry Williams (1998/2011) - Long-Term Secrets to Short-Term Trading, 2nd Edition.

Jarrod Goodwin (2023) - Trading Forex Gaps: Maximising Profits with Proven Techniques (Larry Williams “Oops!”). (video)

Buy and Sell Signals | Larry Williams

 Buy Signal: Dump, dump, (dump), go sideways and pump a bit, one more small dump, then the pump.

Sell Signal: Pump, pump, (pump), go sideways and drop a bit, one more small pump, then the dump.

» If I observe prices in a strong downtrend, then move sideways before dropping again, only to immediately return to the previous trading range, that's a buy signal. Why? Because during the sideways range, accumulation was taking place. The breakdown likely liquidated many long positions, and professional money will often buy in that area. If the price quickly returns to the range, it confirms that they’ve been buying, and that's when I want to enter a long position in the market.  «

 

Quoted from:
Larry Williams (2016) - Buy Signal. (video)

 

See also:

Larry Williams (1998/2011) - Long-Term Secrets to Short-Term Trading, 2nd Edition.