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Archives for October 2022

Session Fib Grid Trend Power bias and Signal Age explained

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So, what are these numbers and where do they come from?

AFT8 TrendOmeter Grid
AFT8 TrendOmeter Grid for the NinjaTrader desktop trading platform – multi-session, multi-timeframe technicals, and trend correlations.
  • Fib Grid is a map/contextual view of the market, with price normalized as a percentage. This is an adaptive formula computed at the session start. Price moves within the grid, which is static all session. 0% is the open, F100% is the projected high, and -F100% is the projected low.
  • Trend Bias Power is a non-lagging real-time expression of the current trend/force. It is a volatility dynamic calculation on each market data change. Price moves within the grid of bands during the bar – 0% is the band, 100% is the outer volatility bands.
  • Signal Age marks when the trend began and if it’s valid or invalid, also known as a “black hole.”

TrendOmeter runs in the NT8 market analyzer and is aimed at high-spec, low-latency gaming desktop PCs and laptops, as it will lag up NinjaTrader 8 and slow down data processing on the system. AFT comes with lite workspaces to avoid this issue, and users can also use the AWT TrendOmeter system, which is lag-free and is a far more sophisticated system for web, desktop, and mobile. AFT8 will link via an API to AWT to allow filtering and signals off AWT.

Alpha Web Trader - TrendOmeter
Alpha Web Trader – TrendOmeter provides a lag-free aggregated instrument and multi-timeframe vertical and horizontal view of the market.
AlphaBias
https://alphawebtrader.com/alphabias shows the trend bias power and the Signal Age view in one screen.

AWT Advanced TrendOmeter is lag-free and will not slow down the PC or NinjaTrader. https://alphawebtrader.com/trendometer TrendOmeter here is showing 13 timeframes using Trend Bias Power. These timeframes are actually aggregations of related instruments and other timeframes combined from around 25 time series and different measurement studies. It is a pivot of the AlphaBias view: https://alphawebtrader.com/alphabias. AWT aggregates instruments such as SPY, VOO, IVV into one stream and aggregates the technicals for TrendOmeter and AlphaBias, so it would use the parent instrument, e.g., SPY, as the display. ES, SP, MES, for example. AWT also uses its own data stream and analytics engine, so it’s roughly equivalent to what you can see in AFT but never exact. AWT shows us breadth and depth based on correlations.

Trend Bias Power and Signal Age
Trend Bias Power and Signal Age provide a 2D view of the trend. The signal age shows trend start and when the trend is invalid as a black hole.

Trend Bias Power % In the chart of the 720min with the USAR indicator, we can see the mid-band is 0%, the upper band 1 is +100%, and the lower band 1 is -100%. Price moves from the mid-band out, so we can normalize price as a percentage. The bands are volatility intervals from the band, so it moves and adapts with the market price cycles of range. TSI/TA comes from this. Trend Bias Power is similar to the Fib Grid in some parts based on volatility and the relation of price within, but it is calculated and moves with the market on each bar. The Trend Bias Power % band could be any number of technical studies. Some examples typically for Moving Averages we use 20, 21, 34, 55 SMA, EMA, WMA with a 1 ATR band to define the 100% above and below -100%. For USAR, we use 1ATR, 1.25, 1.5, and 2.0 with a 1ATR volatility band to define the 100% zone. AFT8 focuses on USAR, Keltner wave, and MA Bands in the AFT8 indicators. Our measurements TA% and TSI come from Trend Bias Power.
Signal Age measures when the trend started and how old it is. SA% comes from this, etc. A black hole is where the signal, for example, is short when the trend first began, but if the trend is contra trend signal direction and it is losing, then it is an invalid trend and marked as a black hole. It could mean the system is transitioning and reversing or in a pullback. So we can focus on the confluence of winning valid trends and ignore or wait for the black holes to go green or red. A mixed view would be green, black, and red. A significant trend direction would be all one color.

Session Fib Grid
Session Fib Grid is a map of the monthly, weekly, or daily sessions with price normalized as a percentage, calculated at the start of each session and fixed.

Fib Grid is a map of the market with price normalized as a percentage, computed at the session start. Price moves within the grid. Fib Grid’s 0% stays static, whereas the Trend Bias’s 0% moves as the anchor point, typically some kind of band average moves with price. SFG uses the daily, weekly, monthly typical ranges usually above and below, but it can use different. So 0 is the open, +100 is the projected high, and -100 is the projected low. Other fib numbers are put in as intervals and no trade zone, and the rest is just statistical.

Trend Bias Power, Signal Age, and Session Fib Grid combined give a good view of the session price position and the trend flow, etc. So now we can move away from the old, stuck-in-the-mud classical lagging systems and start to build a 3D view, especially with other related instruments and order/speed, and so on. Get started 100% free until you decide with AFT Trading System.

Fed 2022 and the bear market

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S&P500 Chart
S&P500 just tested above the 50% retrace from the COVID low to high – next stop 3450 zone and 3200 below.

The central point of both the US system and the equity market is the CPI. The three elements that interest the Fed to intervene are (according to Bernanke’s teachings at Princeton) currently managed by outdated “80s methods:

  1. The short-term money supply:
    • M3, but it refers to Q2 and therefore is old data.
    • The total average weekly earnings – BLS Employment Report. This data shows that as of September 2022, on an overall level, total weekly earnings are year-over-year slightly negative in real terms, but at the individual level, the loss of purchasing power is 3.4%.
  2. Consumption – BEA Personal Income. See the attached tables, which reveal that consumption in real terms as of August 2022 is negative year-over-year and year-to-date, both using the PCE and the CPI as deflators.
  3. The CPI, which is our focus today.

View the Economic Analysis: https://algotradingsystems.s3.amazonaws.com/docs/V+studies.xls

One of the elements alerting us to new pushes or brakes on the CPI is the analysis of the CPI 3 months annualized – elaboration of the BLS CPI report Tab 3 – sheet 3. It is evident that it is a much faster sensor than the year-over-year measure. Demonstration:

  • 3 months indicated strong and increasing pressures on the CPI in February 2021, while year-over-year detected it in May – sheet 3 line 72 and line 123.
  • Let’s see the situation in 2022 to date – 3 months – line 123 and following:
  • The maximum inflationary push 2021-2022 occurs in June 2022 at +12.26 annualized and then collapses at the end of Q3 September 2022 to 0.67.
  • This indicates that at the US system level, the price system, TODAY, has been frozen, with sectors still showing strong increases and others strong contractions.

September 2022 – Q3 2022 – column E shows the weight on the CPI of the various sectors:

  • Overall situation of frozen prices:
  • Sectors that create a strong boost to CPI growth:
    • Food – weight 13.635% – +10.92 annualized. All sectors of food at home and away from home.
    • Energy services – Electricity – due to the high prices of inventories of production fuel.
  • All items less food & energy – weight 78.12% – still high at 5.11 annualized but trending down from June 7.43. This figure is strongly conditioned by the shelter – line 152 – weight 32.47% on the CPI – which remains high and growing. Rent and Equivalent Rent (Mortgages) due to the increase in Fed rates.
  • Sectors that offset the increases – Energy weight 8.24% – the decline in the CL of the “bad” Saudi.

FOOD:

  • The strong push is due to two factors:
  • Domestic and international agricultural production below demand. It is bad economic planning that cannot be resolved in the short term and cannot be resolved with interest rates.
  • A high-cost US production that has significant consequences on manufacturers’ inventories.
  • The fortune of Import prices – BLS Release – Food Feeds and Beverage – 3 months prices annualized September 2022 -9.14, June 2022 -1.90, March 2022 +21.16 – year-over-year September 2022 +3.43%, June 2022 +8.70%, March 2022 +13.62%. It is evident that at the import level there is a strong slowdown in prices. The boost in food is created in particular by Vegetables +20% 3 months annualized +15.50% year-over-year – lack of production. Prices are expected to drop with Southern Hemisphere harvests – December 2022 to April 2023.

SHELTER:

  • It is the Fed’s own policy that creates the inflationary push.

Conclusion:

  • The three elements that should guide the Fed’s monetary policy suggest CAUTION:
  • A consumer with a loss of real purchasing power.
  • Negative consumption in real terms, either using the PCE or the CPI as a deflator.
  • Inflationary pressure created by food due to a lack of domestic production. The increase in production in the agricultural sector is possible but it takes time and investments. The prices of the sector do not respond to interest rates. The growing inflationary pressure created by the shelter – 34% of the CPI – the same Fed policy creates it.

The Fed has already decided on a rate hike of 0.50 / 0.75 in November 2022. The risk is that they will make the same mistakes as Volcker in the 80s that brought the country and the market into recession.

Due to the forecast for November and the Christmas period, it is very likely the bottom will be set before March 2023, and we can expect some type of V bounce or large volatile frothy rallies to continue.

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