Exile and a New Hope

 

yodaexile

 

Greetings,

About 3 weeks ago, my car’s alternator died, costing me almost $400 to get it fixed so I could keep working. After this disaster, I had to pretty much empty out my trading account with the exception of a few bucks just to keep it open.

So at the end of August I’ll be finishing up my delivery job since it’s costing too much in repairs. At that point I’ll have to quickly find another entry-level type job to keep paying the bills.

So I won’t be living on self-generated income anytime soon, whether it be from trading or from writing.  Consequently, I probably won’t be updating this blog for a while, until I get some semblance of financial stability.

A New Hope

However…

Take a look at this scatter plot.

euscatter

This compares a predictive indicator based on fundamental value vs. price performance to the subsequent 13-week price performance of a currency pair; in this case EUR/USD. To be fair, this was the best correlation I found after checking 27 pairs, so here are the correlation results for all pairs using 3 look-ahead periods:

correlations

Finally, to make things a bit more concrete, here’s the indicator for EUR/USD compared to the actual price. The indicator is in blue, and the price is in lavender or whatever that purplish color is. 😉

eupricevsind

The horizontal axis is in weeks. Note that this suffers from the “market can stay irrational far longer than you can remain solvent” issue. As the indicator kept climbing over the first 19 weeks, telling me that the EUR/USD was vastly undervalued, the pair kept falling. So this indicator can lead price by quite a large time period.

Anyway, this is just as exiting, if not more exiting that the whole Tick Density concept.

I haven’t been working much on my half-finished eBook on fundamental trading, but I think I may rework that book to reflect this latest research. It’s essentially the same concept I was writing about, but with several new modifications. I may also set up a subscription section in this site which provides access to weekly updates to the indicator for all the currency pairs listed in the chart above.

We’ll see how that all goes. My primary focus at the moment though is to avoid living under a bridge.

So off I go into exile. But don’t lose hope, and ….  keep pipping up!!

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