Anticipation

If there is an environment cleverly schemed to take advantage of people's behavior it's casinos. Walk into any casino and immediately you're hit by flashing lights and the sounds of bells and clinking coins. Once the door closes the tinted windows make it difficult to distinguish night from day in an attempt to make time cease to exists. Even if you looked you'd be hard pressed to find a clock anyways but don't worry about getting too tired because the pumped in oxygen will keep you alert.

If you care for a game of skill where your knowledge will give you an edge you'll have to walk the gauntlet of the games of chance and maybe you'll get lost and decide to throw down a few bucks on the wheel and have a cocktail because the room you;re looking for is usually hidden in a corner away from it all or in a separate part of the casino down some hallway. And when you've finally called it a day you may just toss down a lucky buck at the slots on the way you. It's all cleverly thought out to milk the cash from the cow.

The most cleverly designed machine of cash extraction is the slot machine. For every dollar the expected return is a few tenths of a percentage less but that doesn't seem to keep the herd from sitting down and using three at a time. Slots are specially designed to exploit what I discussed about in a previous post, anticipation and the false expectation of a series after two data points. When the first 7 hits the anticipation builds and when a second the pleasure response begins to fire even more in expectation of that third seven. What's more nefarious about these machines for those that play them is that this anticipation occurs long before before pulling the lever, it begins entering the door and that's in part why they are at the entrance.

I don't play slots but I did mention being influenced by a few traders I follow on twitter who were taking positions a week back. At the time I was trying to deduce what they were seeing and these two behaviorism were what I choose to explain it to myself. The reason I bring this up again is because they were at it again today as one began making inference that he was taking positions and the other was talking about taking light positions here. So today I wanted to return again and chart their mentions.

Tracking Twitter Trend

We live in unprecedented times where even if you lived on the tundra as long as you have a net connection you can get access to world class traders who will engage with you and are willing to take time to teach you through webinars. I don't expect myself to be aware of all the nuances they see or understand, however that doesn't mean I shouldn't take the time to process what they say. In order to make it understandable to myself I chose to use what I've learned through modern neuroscience and casinos so that it becomes meaningful and sticks, but next time I might use a Grimm's Fairytale, a fractured fairytale, or those loveable magpies Heckle and Jeckle. The point being, be aware of what they say and take notes and internalize it because as traders we're lucky to have it.

Now, on to breadth. Today was a key day as indicated by the Russell which outperformed today and showed great strength closing near the highs of the day. I'm still of the belief that if there is going to be a sustainable rally small caps need to take part otherwise money just keeps flowing like water into the stale bread leaders. New leadership comes from small caps so today was very positive.

Russell

In addition today the secondary indicator I use crossed over again.

Secondary

Lastly, the 10 day differential of buying to selling has been improving. Granted the underlying buying pressure has been modest, but the heavier distribution that the market has seen over the past few months has been waning as well. This become clearer when looking at the raw numbers.

10 Day Differential

Raw Numbers

The main focus now is honing in on stocks that are showing relative strength because if the market will begin a new leg up the correction over the past few months should start showing up on the charts and quality set ups should stick out like a sore thumb.