Fresh Strong Buy Signal on the EUR/USD and some Think Script Code

I'm long the Eur/Usd...my TrendFuzz system just switched from Buy to Strong Buy. The pair may make a run for it's recent highs, which would make for a great trade.  Here's the chart:

Note the bars changed from dark green to bright green indicating a "strong buy" signal.  This combined with the Trend Confirm Dots (a separate trend following system) makes the pair look bullish right now.

A quick explanation of the TrendFuzz system is in order and I'll briefly describe it since I've been referencing it for a little while now.  TrendFuzz, is a trend following system that combines a market thermometer indicator or thermo with a volatility break out system.  The thermo measures an instrument's ability to make higher highs or lower lows (similar to what A. Elder described in Come Into My Trading Room) and it combines this score with another score based on current price in relation to a couple of past prices..like prices from 20 and 50 bars ago.  So, one part of the trendfuzz indicator is based on an increased/decreased average of thermo scores and the other part is just a volatility break out confirmation...the instrument needs to move 2x its historic volatility kind of thing.

This indicator is great for catching trends and does a decent job of minimizing risk.  The volatility filter helps filter out moves that are likely to whip saw...although not all of the moves get filtered out.  The "fuzz" in trend fuzz alludes to "fuzzy logic." This is because it is an adaptive system that can change its criteria for readings based on recent trading activity.  This means that an uptrend reading from today can have different criteria than an uptrend from a month ago...hence a fuzzy definition. 

I'm not going to share the code or the internals of the full system, but, I will share the basic code for the Thermo...which is what a good part of the system revolves around.  Some of the programming might be a little redundant and amateurish because, well, I'm not a professional programmer...just a self taught market junky that knows enough to get by.  The code used in the system is similar to this one, but it has been tweeked quite a bit.  This Thermo indicator is still rather interesting and can be useful to anyone interested in a new indicator. It uses a 52 Week High/Low score verbiage but its not really referencing the 52 week high/low..that is leftover from the original indicator.  Now can be set to look back at any bar you want..like 10 bars, 20 bars or even 100 bars back, just make sure the aggregation period on the chart is the same selected for the indicator.  Here's the code for thinkorswim:
####################################################
declare lower;

input ThermoAGPeriod = {default MONTH, MIN, HOUR, DAY, WEEK};
input ThermoLookBackBars = 12;
input PlotType = {default ExpMovingAverages, Standard};

def HighLowScore = 1000*((high-high[1])/(high[1])+
(low - low[1])/low[1]);

def A = highest(high(period = ThermoAGPeriod));
def B = lowest(low(period = ThermoAGPeriod));

def FiftyTwoWeekHigh = A[ThermoLookBackBars];

def FiftyTwoWeekLow = B[ThermoLookBackBars];

def FiftyTwoWeekScore = 10 * (((high
- FiftyTwoWeekHigh)/FiftyTwoWeekHigh) +
((low - FiftyTwoWeekLow)/FiftyTwoWeekLow));

def ThermoScore = HighLowScore + FiftyTwoWeekScore;

input MAPeriodShort = 9;
input MAPeriodLong = 50;

def EMA = ExpAverage(ThermoScore, MAPeriodShort);
def EMA2 = ExpAverage (ThermoScore, MAPeriodLong);

plot Line1;
Plot Line2;

Switch (PlotType) {
case ExpMovingAverages:
    Line1 = EMA;
    Line2 = EMA2;
case Standard:
    Line1 = ThermoScore;
    Line2 = ThermoScore;
}

def InvisibleLine=close*0;
plot Line3 = InvisibleLine;
Line3.hide();


addcloud(Line1, Line2, Color.CYAN, color.Dark_RED);
addcloud(Line2, Line3, Color.Dark_Gray, Color.Magenta);     

#####################################################

Enjoy and let me know if you have any questions.

TLT

A Glimpse at the TLT Trender v3

Haven't posted in a while, I've just been really busy with work and life in general.  All though I haven't posted much, I have still been very active in the markets.  Also, I've been working on the next generation of my trend following system--The TLT Trender, which is now on its third version.  This version is taking a little while, mainly because I've been coding it myself and I've been coding it for Think or Swim, as opposed to MetaTrader 4 on the last version.  Here's a screen shot of what it looks like right now: 

As you can see from the chart above, the bars on the chart change color based on the current signal.  The bars are changing color based on the reading of the Thermo Adaptive indicator down in the second indicator window.  The Thermo Adaptive indicator is the heart of the system and the ATR Average Compare indicator in the third window acts as a confirmation of trend (2 is a strong uptrend, 1 is weak uptrend, 0 is neutral, -1 is weak down trend and -2 is a strong downtrend). 

The Thermo indicator is based on the previous thermometer that I've posted on before.  Although it is similar, this version is much different and far more sophisticated.  This indicator constantly tracks a stock's ability to make higher highs and higher lows and trade around significant levels (like 52 week highs or 20 day highs) and then the indicator tracks current prices verses different averages of these thermo readings.  The different averages are actually adaptive averages (hence Thermo Adaptive) and they will tighten up when trending and loosen up when price action is choppy and inefficient.

I'll post more about these new versions of my indicators soon and maybe post some of the code for other Think or Swimmers out there.  One neat way that I've recently (like a week ago) began implementing this indicator is by taking current readings of every stock in the S&P 500 on three different time frames on a daily basis.  This is allowing me to track the trends in different sectors on different time frames to get a feel for the orderflow in the market.  It's still early and there's much more work to be done.  I'll post more soon.

TLT

Quick Glance at the World

Here's a screen shot from a spread sheet that I've started keeping up with. It ranks 25 Country ETF's based on Relative Strength and then it also has a temperature score for each county (Temp. scores are based on a stocks ability to make higher highs and higher lows combined with where it's trading relative to its 52 week highs and lows). A couple things to note, Russia is the strongest today and it clocked in an impressive 91 temp. score...that's cookin! What I think is really interesting on this sheet is how all of the Asian countries are at the bottom...concerns over China maybe?..I don't know. I'll have to keep an eye on this.

I just started this spread sheet last weekend and am looking forward to watching the macro view of the world stock markets and seeing how this sheet helps keep me abreast of the global picture. I'll post an update on it soon.

Hope everyone's having a good week.

TLT

A Couple Things To Keep An Eye On

Here's a quick look at some of the good performers from today...maybe this will give us an idea of what to look at for potential trades for tomorrow and possibly the rest of the week. To begin with, here are the 3 ETFs with the highest Relative Strength Scores (a proprietary measure that weights recent price action to the S&P 500) with their corresponding Thermometer Temperatures (proprietary score that measures a stock/etf's ability to register higher highs and higher lows):As you can see, Semiconductors led the pack today (#1 out of 30), with Consumer Discretionary not far behind (#3 out of 30). Lets take a closer look at the Semiconductors. Here's the Market Thermometer Temperatures for the three individual stocks that I follow in that sector:Not surprising that they are very strong. So far we have established that the Semis were strong today, but how have they been trading lately. For that I look at what I call the cumulative temperature score. This takes the past 5 day's trading action and comes up with 2 scores: an average and a total. Here's where they stand: Out of the 30 stocks in 10 sectors that I track daily, only 9 of them managed to have thermometer scores above their 5 day average today...and all three of the semiconductor stocks turned out to be part of those 9 stocks. Furthermore, the 5 day totals are in the top 25% rank of the 30 stocks, this shows that the stocks have been bullish for several days, not just one. These are both very bullish signs.

So what does all this mean? It means to watch the semiconductors! I track and trade (in my personal account) these three (INTC, TXN, AMAT) and I also watch and trade (for the firm account) SNDK. I'll be looking for long trades in these as long as SMH continues to show strength.

What else is looking interesting right now? The quick answer is GE...and maybe industrials in general. To begin with, GE has a phenomenal Temperature score today..see below: Also, there was some interesting volume in the industrials today..GE included. Only 1/3 of the stocks that I track (10 out of 30) traded volume today that was above their 20 day average volume and all three industrials were in this group. This alone makes them worth watching...at least worth keeping an eye on GE for a potential day or swing trade.

This is the type of analysis that I do on a daily basis. I've admitted that I love spreadsheets and this is how I use them. Going through these exercises on a daily basis helps me keep on top of market action and it gives me trading ideas.

That's all I've got for now..hope everyone's having a great week so far.

TLT

On the Radar for Tomorrow

I have several spread sheets that are part of my nightly homework. The majority of the spreadsheets are automated (meaning that I just have to download current data and formula's fill in the rest) and some bits of them require some manual work. I bring this up because I think that going through this same exercise every night helps me stay in tune with the market and it gives me ideas of what to keep an eye on for the following trading day.

Here are a couple of snippets from one of my spread sheets that shows the 2 strongest sector/asset classes for today and the bottom 4 sector/asset classes. As you can see, Financials and Materials were today's leaders and Gold, Crude Oil, 20 Yr. Bonds, and Silver were the big losers. These will be the first things that I watch as tomorrow's trading unfolds and I'll be looking for continuation in these sectors. As for the spread sheet, it is broken up into two sections:

• Relative Strength--this ranks the sectors and asset classes by the performance vs. the S&P 500 (this is the same relative strength sheet that I used to post weekly on the blog) putting the most weight on today's price action but also incorporating price day's returns.
  
• Market Thermometer--loosely based on Alexander Elder's indicator with the same name, this indicator rates a stock's ability to trade at higher/lower levels...this helps with the relative strength rating because sometimes you can have a high or low relative strength rating in a stock but the stock is merely trading in the middle of a range. The thermo. is not anything super fancy, it just gauges the day's price action versus recent high/lows and the 52 wk high and low.

There you have it, a lot of words to really just say watch financials (especially JPM) and materials (DOW) and look to short silver, gold (GG, IAG) and bonds (TBT).

Hope everyone's having a great trading week so far.

TLT