The Weekend Dip Myth

[Stephen Gornick]

Just an update .. another weekend dip decision, but there is probably NO green light.  

I say probably because it comes down the the exact timing.  Last Thursday the high was $12.66, which is below last Wednesday's $12.68666.

Technically, there could be a green light.  As of now the high for the last 7-day period was lower than the high for the 7-day period prior to that.  But the difference is less than two pennies.

And right now the exchange rate is in an uptrend by a few percent, from just under $12.  So I can't say there is an apparent week-to-week downtrend, which is when the "weekend dip" green light would show on.  So this weekend isn't one that I'll be selling into, hoping to buy back at a lower rate.

Also, tomorrow is the last Friday of the month, which possibly will start becoming important.  MPEx appears to have sold over a hundred thousand option contracts, and they expire tomorrow.  When the month closes at or near its high (e.g., when the month ends in rally mode), those who sold [Edit: bought] PUTs generally lost money.  So they may be motivated to buy more BTCs to be able to open new PUT (short) positions.  The option contract holders that might have made money are those holding CALL options.  That is a long position, and those holding them then are generally going to be bulls (i.e.  unlikely to be dumping their BTC profits earned and trading them for USDs.)

MPEx option volume was much higher than last month's volume and last month was by far a record in terms of option volume as well.   That means this is a monthly event that is new and speculators might not already be considering its impact.

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[ArticMine]

Just an update .. another weekend dip decision, but there is probably NO green light.  

I say probably because it comes down the the exact timing.  Last Thursday the high was $12.66, which is below last Wednesday's $12.68666.

Technically, there could be a green light.  As of now the high for the last 7-day period was lower than the high for the 7-day period prior to that.  But the difference is less than two pennies.

And right now the exchange rate is in an uptrend by a few percent, from just under $12.  So I can't say there is an apparent week-to-week downtrend, which is when the "weekend dip" green light would show on.  So this weekend isn't one that I'll be selling into, hoping to buy back at a lower rate.

Also, tomorrow is the last Friday of the month, which possibly will start becoming important.  MPEx appears to have sold over a hundred thousand option contracts, and they expire tomorrow.  When the month closes at or near its high (e.g., when the month ends in rally mode), those who sold PUTs generally lost money.  So they may be motivated to buy more BTCs to be able to open new PUT (short) positions.  The option contract holders that might have made money are those holding CALL options.  That is a long position, and those holding them then are generally going to be bulls (i.e.  unlikely to be dumping their BTC profits earned and trading them for USDs.)

MPEx option volume was much higher than last month's volume and last month was by far a record in terms of option volume as well.   That means this is a monthly event that is new and speculators might not already be considering its impact.

How can selling or writing a put option loose money in a rising market? Do you mean those who bought a put option in a rising market lost money?

[Stephen Gornick]

How can selling or writing a put option loose money in a rising market? Do you mean those who bought a put option in a rising market lost money?

Heh, yes -- that's what I meant.  

I might need to go back to reading the beginner's guide    :

Using MPOE - A beginner's guide.
 - http://bitcointalk.org/index.php?topic=67302.0

[Stephen Gornick]

So this weekend isn't one that I'll be selling into, hoping to buy back at a lower rate.

And good thing for that, because doing so would have been a bad move.


In addition to the "Weekend Dip" pattern is the "New Money Monday" pattern.  This is where if large amounts of funds do arrive at the largest exchange, they start hitting around Monday evening (west) / Tuesday morning (east).  This is because during Monday banking hours in much or Europe and all North America timezones, Mt. Gox is already closed for the day and thus those transfers aren't made available for trading until Tuesday morning (Japan timezone), And because when there is panic buying, it pays to panic first, those funds result in some nice gains in the exchange rate for those wishing to sell.



 - http://bitcoincharts.com/charts/mtgoxUSD#rg60zig12-hourzczsg2012-09-27zeg2012-10-03ztgTzm1g10zm2g25


Now what would be nice to learn would be a good way to predict, during the weekend, the degree of increase, if any, that New Money Monday will bring.

This past weekend was nearly absent of any significant news or media attention, really.  Volume was quite low -- that oftentimes precedes a breakout heading north.  

[Yuhfhrh]

So this weekend isn't one that I'll be selling into, hoping to buy back at a lower rate.

And good thing for that, because doing so would have been a bad move.


In addition to the "Weekend Dip" pattern is the "New Money Monday" pattern.  This is where if large amounts of funds do arrive, they start hitting around Monday evening (west) / Tuesday morning (east).  This is because during Monday banking hours in much or Europe and all North America timezones, Mt. Gox is already closed and thus those transfers aren't made available for trading until Tuesday morning (Japan timezone),  And because when there is panic buying, it pays to panic first, those funds result in some nice gains in the exchange rate.



 - http://bitcoincharts.com/charts/mtgoxUSD#rg60zig12-hourzczsg2012-09-27zeg2012-10-03ztgTzm1g10zm2g25


Now what would be nice to learn would be a good way to predict, during the weekend, the degree of increase, if any, that New Money Monday will bring.

This past weekend was nearly absent of any significant news or media attention, really.  Volume was quite low -- that oftentimes precedes a breakout heading north.  

I'm always prepared for NEW MONEY MONDAY 

[Stephen Gornick]

It is Wednesday evening (west) / Thursday morning (east) ... Weekend Dip decision time!

So we definitely aren't in a downtrend, where at the moment the exchange rate is at the highest level since the pirate rally/selloff in mid-August.  So there is NO green light indicating a Weekend Dip strategy should be attempted.  

And while these little weekend bounces that occur can sometimes juice the value of your account, the following chart shows how there's never been turns without first there being a parabolic rise blowoff top that happens first.  i.e.., maybe there will still be little dips, but they probably aren't worth chasing when in an uptrend.



And if you look at the 60-day chart, we aren't in a parabolic rise but pretty steady along a nice linear one (since the mid-august mini-crash).



 - https://ferroh.com/charts


But who knows though.  Without any decent methods to short bitcoin, the exchange rate rises to some level and all of a sudden the market gets spooked, the herd runs for the exits and nobody wants to be the last out.  

It can't be ignored that Bitcoin has had quite a run:



 - https://docs.google.com/spreadsheet/oimg?key=0AmcTCtjBoRWUdEgxb0lEb1h1M2htM05sY0pXd3FXQ2c&oid=3&zx=k0euet1rgp0i

[Stephen Gornick]

If the weekend indicator continues being accurate, then now would be a good time to dump some coins!



 - http://bitcoincharts.com/charts/mtgoxUSD#rg60zczsg2012-10-03zeg2012-10-19ztgSzm1g10zm2g25

That shows a clear week-over-week downtrend (measured Wednesday evening (west) / Thursday morning (east),  ... and yes, I'm a little late looking at this ... sorry) and thus there is a GREEN LIGHT.

Now all this says is that historically when this condition occurs, more often than not the price drops into the weekend, where the coins can be bought back at a lower level.

Timed properly, this trade should have begun about 18 hours ago (when the exchange rate was around $11.75-ish).   I'm late in looking at this, and actually benefit by selling at a higher level, ... just under $12. 

For scoring the Weekend Dip indicator's success though, $11.75 will be the amount used.  Looking for a dip by a couple percent below that for this weekend dip indicator to ring true.

We'll see!

[Stephen Gornick]

For scoring the Weekend Dip indicator's success though, $11.75 will be the amount used.  Looking for a dip by a couple percent below that for this weekend dip indicator to ring true.

Well, that was an exercise in futility.   There wasn't much of a dip and there's nothing indicating one is forthcoming before New Money Monday arrives.

So buying back at the current market rate of $11.62 means about a 1% gain, which got eaten up by trading fees.  Following the weekend dip strategy this past weekend resulted in a wash, financially.

Perhaps there will be some who made out a little better thanks to having perfect timining, trading out of some coins on Thursday closer to $12 and at least took a percent-and-a-half gain, but for scorekeeping, there was no benefit (nor harm) from doing the weekend dip trade this weekend.  

Now the weekend isn't over, and there still could be a little further dip, however trading volume is at a pathetically low level, just 10K BTC traded in the past 24 hours at Mt. Gox for example.  When that happens, all that needs to happen is for the tiniest bit of buying to propel the exchange rate up three percent, or five percent in a short amount of time.

That doesn't often happen in the middle of a weekend, but sometimes a rally will appear out of nowhere once Monday banking begins at Mt. Gox (which is in Japan, thus Sunday evening in U.S. timezones).

And the only protection against that when playing the weekend dip is to get back in before others speculating on the dip do the same.  And that time is now.

[mobodick]

For scoring the Weekend Dip indicator's success though, $11.75 will be the amount used.  Looking for a dip by a couple percent below that for this weekend dip indicator to ring true.

Well, that was an exercise in futility.   There wasn't much of a dip and there's nothing indicating one is forthcoming before New Money Monday arrives.

So buying back at the current market rate of $11.62 means about a 1% gain, which got eaten up by trading fees.  Following the weekend dip strategy this past weekend resulted in a wash, financially.

Perhaps there will be some who made out a little better thanks to having perfect timining, trading out of some coins on Thursday closer to $12 and at least took a percent-and-a-half gain, but for scorekeeping, there was no benefit (nor harm) from doing the weekend dip trade this weekend.  

Now the weekend isn't over, and there still could be a little further dip, however trading volume is at a pathetically low level, just 10K BTC traded in the past 24 hours at Mt. Gox for example.  When that happens, all that needs to happen is for the tiniest bit of buying to propel the exchange rate up three percent, or five percent in a short amount of time.

That doesn't often happen in the middle of a weekend, but sometimes a rally will appear out of nowhere once Monday banking begins at Mt. Gox (which is in Japan, thus Sunday evening in U.S. timezones).

And the only protection against that when playing the weekend dip is to get back in before others speculating on the dip do the same.  And that time is now.

In my experience the end of the weekend dip is usually a bit later than what you propose.
About 6 to 8 hours from now.

[Stephen Gornick]

This is something.



 - http://bitcoincharts.com/charts/mtgoxUSD#rg60zczsg2012-10-11zeg2012-10-26ztgSzm1g10zm2g25

That shows a clear week-over-week downtrend (measured Wednesday evening (west) / Thursday morning (east)).  Looking at it at the correct time, on Wednesday evening / Thursday morning, the GREEN LIGHT was definitely on (i.e., in a downtrend, current 7-day period versus previous week's 7-day period).

So anyone following the weekend dip strategy verbatim would have done the trade hours ago (again, Wednesday evening (west) / Thursday morning (east)) when the exchange rate was $11.50-ish.

Anyone who did that currently can buy those back at $11.10, and see a several percent gain even after trading fees.

So technically, this Weekend Dip indicator yielded a +1 already, regardless what it does for the rest of the weekend.

Now for those who, like me, were only observers rather than sellers -- the question now is .. "is it too late"?

The weekend dip strategy isn't useful for indicating patterns within a weekend.  It simply says when there is a green light on Wednesday evening (west) / Thursday morning (east) then historically sometime over the next two or three days (or so) the exchange rate will drop.  It doesn't suggest how much it will drop, or when.   But following the strategy when the green light if flashing has historically been profitable more often than not.

This 5% drop in the exchange rate occurred without there being real heavy selling.   Because this dip happened pretty early, there will be new funds arriving in Japan on Friday morning (Thursday evening / west), so the "New Monday Monday" may come early ... on Friday, so fellow weekend dip followers, keep that in mind.  But if there's no spike back up, then there could be more dipping (resulting in a bigger gain), yet to come.

[bigasic]

Didn't Mt.Gox have an issue with their European banks? Right now, isn't it more difficult to deposit/withdrawl from the EU? Its the only news that I've heard that would cause such a sell off.. This is a great time to buy.. I wonder where it will bottom out?...

[Stephen Gornick]

Didn't Mt.Gox have an issue with their European banks? Right now, isn't it more difficult to deposit/withdrawl from the EU? Its the only news that I've heard that would cause such a sell off..

SEPA is fine, but for those in the UK it's been a rough number of weeks.  Mt. Gox has no support currently from their UK bank Barclay's, and Intersango has lost the ability to use its UK bank, Metro.  

Fortunately, Blockchain.info added Barclay's Pingit and Bitcoin-Central just this week launched its BTC/GBP marketplace, so those in the UK are regaining service through exchanges (in addition to using local traders who have gained activity and grew their client base).

Whether that type of activity alone is enough to sway the exchange rate much though is doubtful.  I'm not even going to try and speculate as to why this selloff is underway.

[Stephen Gornick]

This is a great time to buy.. I wonder where it will bottom out?...

Well, looks like 9.74 was that point, but there were plenty of chances under $10.

I have a feeling though there are a few new approaches for handling the "Weekend Dip".

1.) Coinbase, instant sign-up, instant purchases.    When linking a bank account to a Coinbase account (available just for those in the U.S., for now), bitcoins can be purchased with a bank transfer 24/7.

The coins aren't added to the account's wallet until the bank transfer completes (two or so business days) but the exchange rate is locked in at the time of purchase.   This is the first time this capability has ever existed for buying bitcoins.


2.) MPOE options.   The exchange just saw what appears to be its biggest single-day volume of its options contracts.   There were over 20,000 PUT option contracts sold nearly all at once over the weekend.  (Someone is counting on a rebound in price!)

The reason that a "weekend dip" occurs is generally attributed to the imbalance where selling can occur 24/7 and there are no new, incoming funds arriving through banks (which are closed on the weekend) and any wires to Mt. Gox aren't seen until arrival on their Tuesday morning.   But options contracts aren't bought as the result of a conversion from cash thus these transactions can occur on the weekend as much as at any other time.  So options purchases on the weekend can help counter the price swing that occurs during a "weekend dip"

Though this exchange has been offering options for over a year now, their trading volume has just recently become significant.

3.) ICBIT.se  - similar to MPOE, ICBIT futures contracts on the BTC?USD are purchased with bitcoins, so that too isn't something that needs to
"wait for Tuesday" to trade either.   While ICBIT's volume isn't quite yet enough to impact the exchange rate much, it does offer 10:1 leverage -- giving anyone caught with not enough USDs on a weekend to lock in so that if the exchange rate rises the upside can be captured.

For these three reasons, the Weekend Dip's days may be numbered.

[dree12]

This is a great time to buy.. I wonder where it will bottom out?...

Well, looks like 9.74 was that point, but there were plenty of chances under $10.

3.) ICBIT.se  - similar to MPOE, ICBIT futures contracts on the BTC?USD are purchased with bitcoins, so that too isn't something that needs to
"wait for Tuesday" to trade either.   While ICBIT's volume isn't quite yet enough to impact the exchange rate much, it does offer 10:1 leverage -- giving anyone caught with not enough USDs on a weekend to lock in so that if the exchange rate rises the upside can be captured.

For these three reasons, the Weekend Dip's days may be numbered.

I inquire, why hasn't ICBIT.se achieved the success of Bitcoinica, given its superior feature set? At its apex, Bitcoinica's power was so far-reaching it became the scapegoat for virtually any price fluctuation.

These forums, especially, have become quiet. No threads asserting "LONG SQUEEZE", "STARFISH ON SELL", and the like seem to be popping up anymore.

[koin]

I inquire, why hasn't ICBIT.se achieved the success of Bitcoinica

can you answer where icbit is located?  the track record for exchanges and other businesses run anonymously is horrible, so not many people are willing to risk many bitcoins.

[deeplink]

These forums, especially, have become quiet. No threads asserting "LONG SQUEEZE", "STARFISH ON SELL", and the like seem to be popping up anymore.

https://bitcointalk.org/index.php?topic=85687

Some user in that thread is shouting either PLUNGE or SQUEEZE all the time, depending on the drugs he has taken. Sometimes I even agree with him.

[Yuhfhrh]

These forums, especially, have become quiet. No threads asserting "LONG SQUEEZE", "STARFISH ON SELL", and the like seem to be popping up anymore.

https://bitcointalk.org/index.php?topic=85687

Some user in that thread is shouting either PLUNGE or SQUEEZE all the time, depending on the drugs he has taken. Sometimes I even agree with him.

Lol 

[molecular]

I inquire, why hasn't ICBIT.se achieved the success of Bitcoinica

can you answer where icbit is located?  the track record for exchanges and other businesses run anonymously is horrible, so not many people are willing to risk many bitcoins.

right: the burnt don't play with fire and trust takes time

[molecular]

These forums, especially, have become quiet. No threads asserting "LONG SQUEEZE", "STARFISH ON SELL", and the like seem to be popping up anymore.

https://bitcointalk.org/index.php?topic=85687

Some user in that thread is shouting either PLUNGE or SQUEEZE all the time, depending on the drugs he has taken. Sometimes I even agree with him.

yet the question hasn't been sufficiently answered: where are the shorts?

[adamstgBit]

These forums, especially, have become quiet. No threads asserting "LONG SQUEEZE", "STARFISH ON SELL", and the like seem to be popping up anymore.

https://bitcointalk.org/index.php?topic=85687

Some user in that thread is shouting either PLUNGE or SQUEEZE all the time, depending on the drugs he has taken. Sometimes I even agree with him.

yet the question hasn't been sufficiently answered: where are the shorts?

the shorts are on Gox, in the form of sold bitcoins