Hold signal + Apr Trades

Holding 50% short position...

Date	Signal	TNA
Mar 30	Short	87.21
Mar 31	Hold
Apr 1	Hold
Apr 4	Hold
Apr 5	Hold
Apr 6	Short	91.85
Apr 7	Hold
Apr 8	Buy	87.56
Apr 11	Buy	85.18
Apr 12	Buy
Apr 13	Hold
Apr 14	Hold
Apr 15	Sell	85.78
Apr 18	Buy	81.69
Apr 19	Hold
Apr 20	Hold
Apr 21	Hold
Apr 25	Buy	88.35
Apr 26	Short	90.80
Apr 27	Hold
Apr 28	Hold
Apr 29	Hold

System Strategy Change

All system trades will now take place on the open the following day. 

Background: My system uses VIX data to help determine signals.  The problem is that the VIX  at 3:59:59 pm is different from the closing VIX value at 4:15pm.  My model is calibrated using the closing price of VIX, which can evidently jump significantly in those 15 minutes. When my signals are borderline, this is a big problem.  I'm not sure how, but this hasn't really been an issue up until recently.   Two days ago when I got a short signal, the VIX was 15.55 right before the close.  The critical threshold was 15.57 (refer to my 4/26 post) and between 4 and 4:15 it jumped to 15.62.  This higher VIX # would've generated a "hold" signal, which means I would've still been long. Then it happened again today. The VIX was down almost 7% at 4pm resulting in a hold signal, but has since jumped up to a value of 14.62 which would trigger a short signal.

This problem I doubt will ever go away, so I'm making an immediate change to my strategy.  I will not be forecasting the signal before the close anymore.  I will have to wait until 4:15 to get the signal and trade on the open the following day. 

The good news is this should make life simpler.  Visit the website sometime at night to get the signal, place an order to buy TNA/TZA on the open, and you're done.  A market order would work, although a limit order set to the closing price is probably a better option so as to avoid a bad fill on a gap down.  More on this later...   Have a great evening!

Hold confirmed

3:52pm:  Hold confirmed.  System remains 50% short. 

12:49pm: I am getting another short signal today.  Since this is the 2nd consecutive short signal, it will push the system all in - 100% short.

Hold

3:47pm: Hold signal is confirmed. 

11:32am: We are looking at a hold signal this morning, although a buy is not far off.... With the volatility expected later today, I predict we'll get the buy signal, but check back before the close for the official sign.

Short confirmed

4pm: Got it.  $VIX was 15.55 at the close.  I am now 50% short... for better or worse. 

3:49pm: Short signal is waning.... $VIX must close at or below 15.57.  Currently 15.59... Watch this number as it will determine whether the system holds onto its long position or goes short. 

3:30pm:  Still on track for a short signal at the close.   Will be closing my long and initiating a 50% short position...

11:16pm:  A couple things... First, I had set a limit buy order for the closing price (88.35) yesterday and to my surprise it was hit while I was away from the computer.  Second and more importantly, I am getting a short signal.  Assuming it can hold into the close, I'll sell my longs and take a 50% short position.  Will be back later with an update...

Buy signal

4:10pm: Buy signal is confirmed.  The system is now 100% long with an average price of TNA 85.02.  Again I chose not to follow my system.  I remain 100% cash and will take my long position near tomorrow's opening.  I was a bit perturbed when prices kept rising into the close and feel there will be a better price in the morning.

3:50pm:  An SPY close below 133.7 will confirm the buy signal. 

3pm:  Still a buy signal, although it's a weak one.  I would've liked to see more weakness to get a better price, but I suppose the lack of weakness is probably bullish going forward. 

11:03am: Everything is going as planned.  We are getting a 2nd buy signal today.  If it holds into the close, the system will be 100% long.  I think this is a pretty low risk set-up on the long side.  I say this for several reasons, the primary reason is that while the VIX is up huge, VXX is up a measly 0.04%.  It's days when VXX is up more than the VIX index where one should be concerned.   I am 100% cash but will be taking a large long TNA position before the close...assuming the buy signal holds through 4pm.  Will update later.

Another hold...

3:50pm:  TNA is right back where I sold this morning, now moving even higher as I type.  Oh well...maybe there will be a small pullback next week I can buy back in.  Official signal is a hold.  Enjoy the extended weekend!

I was thinking we would see a sell signal today.  I sold all my longs on the open with the thought that we'd at least see a fill of today's gap.  No way 2 sizable consecutive gaps could go unfilled, right? Well it looks like today filled and now we are probably headed higher.  There is no sell signal in sight, at least not that I can see.  I'm hoping today provides a bit more weakness so I can get back long again, in accordance with the system.  Again, today will probably be another hold signal, but check back before the close. I will be away from the computer this afternoon, but I should be back just before the close.

Hold confirmed

4pm:  As expected, we closed near the high of the day (at least TNA did), and the hold signal held into the close... I expect the rally to continue.  If we see a down day tomorrow or early next week, the system will probably buy it and would then be 100% long.

1:16pm: Statistics show that big gap ups that go mostly unfilled should lead to more upside in the near future, especially when the range of the day is small and we finish near the high of the day.  My system agrees and is giving a hold signal right now.  I would like to see us close higher than where we are right now.  Otherwise, the system may give a sell signal.  I will update later.

Hold confirmed

1:50pm: Hold signal today.

Buy signal confirmed

4pm: Buy signal is confirmed.  System takes a 50% long position at TNA 81.69.   50% remains as cash in case we get another buy signal before the next sell/short signal.  Good evening! 

2:45pm:  Here is the latest model output... A fairly strong buy signal.

12:55pm:  Earlier, I incorrectly stated the market had flipped to unhealthy.  It has not.  So long as SPY remains above 128.32 (the swing low of 3/23) we are still healthy.  To understand how I'm determining market health, read the comments from my April 9 "Weekend News" post.  Here is a quick rundown (click to enlarge).  With market health still intact the system is giving a buy signal, one in which I believe is fairly strong.

11:04am: How lucky was that sell signal 15 minutes prior to Friday's close? I'll take it! With today's plummet the market status flips to unhealthy. Additionally, with the poor attempt at a gap fill in the first hour, we are probably looking at a trend day down with a finish likely near the low of the day. This looks like a perfect set up for a short daytrade. As for my system, a buy signal today is impossible as a critical rule has been broken. Perhaps tomorrow will offer up something, be it a long or a short signal. For now I'm remaining on the sidelines with a hold signal firmly in place.

Sell signal...

5pm: With that nice burst before the close (which seems to happen frequently on trend days) I was able to get a pretty good price of 85.70 which gave me a small gain overall for my long position (I bought my 2nd batch of TNA on 4/12 rather than 4/11). It was a roller coaster ride the past few days and I'm more than happy to end up in the black. The system hints at the possibility of more upside by not giving a short signal. As I said before, I'd like to see a pullback before we continue to work our way higher. Until then, adios...have a good weekend and thanks for reading.

3:51pm: Back to a sell signal. I'm exiting here.

1:09pm: Recently, one of the indicators built into my system has generated an upthrust alert. An upthrust alert in a healthy market overrides the sell signal and forces a hold signal to be produced. If this continues into the close, I will be holding my long position over the weekend.

11:38am: Looks like we will probably get a sell signal today. I doubt we'll get a short signal though, so at 4pm I'll be closing out my long and sitting on the sidelines for the weekend. Perhaps we'll see some weakness early next week for the system to buy back into. We'll see. I'll update later.

Hold

I'm not sure how much we'll rally from here, if at all. I'm getting a hold signal, so hopefully there is still room to run to the upside. For bulls, the obvious inverse H&S forming on the daily is encouraging. For bears, today could just be a bounce before the next burst to the downside. Who knows which way we'll go...certainly not me. I'm just going with my system which I have full faith in.

Hold 100% long position

Nothing to report today. System says to hold longs. Should be more upside in the days to come...

out of town...

6pm: Today generated another buy signal. That's 3 in a row. If we don't see a rebound soon, I'll be surprised. The system is averaged in 100% long TNA at 86.37. I'm in a bit better shape since I waited til this morning to buy my 2nd batch of TNA. I'm "all in" averaged at 85.28. The next week or so should be interesting. Even if we see some continued downside the next few days, I'm expecting a sizable rally starting Friday at the latest. Until then, I'll be holding tight.

2:44pm post from my dumb smartphone (aka Motorola Backflip, aka Soon to be paper weight)
I don't have my laptop so no system update til tonight. Probably another buy signal... before i left this morning i placed a limit buy order for my other 50% at 83.00. I see it filled and then some...im now averaged in at 85.25ish...now I have to sit back and wait for a rally.

Buy #2 confirmed

4:05pm:  The buy signal held into the close.  I wasn't at the computer on time, so I'll be adding to my long position on the open tomorrow.  

2:27pm: Vix is down big while the market is also in the red.  Usually results in a short term bounce.   System is generating another buy signal, which if it holds into the close would put the system all in, 100% long.  WIll update later...

Weekend News

My system performed poorly in December and now also late March.  Both time periods coincide with strong rallies during a supposed downtrend.  The biggest strength of my model is that it is adaptable and dynamic. It first determines the status of the market which I have called healthy or unhealthy. I hesitate to call it uptrending or downtrending b/c it's more sophisticated than that.  It then uses variable parameters to calculate the signals, depending on the market's health.  Both in Dec and late March, in hindsight it's easy to see the system was too slow with the switch back to healthy status.  Of course, you also want to avoid the whipsaw action that's prevalent during unhealthy times, so the balance has to be just right.  That is the key.  With that in mind, I think I've accomplished the goal.  The adjustment I'm making requires very little change to the model.  I'm not messing with the code that calculates the buy/sell signals nor am I messing with how it handles the transition from healthy to unhealthy.  I'm only changing how it handles the transition from unhealthy to healthy so that we are not shorting heavily into real strength.  Here are some side by side examples of how the new technique compares to the old.  First example, from December 2010 - the only month my system took a loss since the inception of this site.  (click to enlarge, if necessary)

It's obvious the changeover back to healthy on the 24th makes a dramatic difference.  Here is example #2 from last month...

Again, the switch to "healthy" on the 23rd allows the system to catch the Buy signal on the 23rd and the 28th. The percent gain in both these cases is significant to say the least.  The examples go on and on in the past, but I will refrain from making this post longer than it already is.  We probably won't see the benefits of this tweak for awhile since we are already "healthy", but I have confidence we'll be able to buy in near the bottom the next time the market is down.  Have a good weekend...and here's to a gap up next Monday! :)

Buy confirmed

830pm:  I could've lived without the pop at the end of the day, but the buy signal held on.. barely... I covered all my shorts and took a 50% long position & 50% cash.  The average price of the system's short position was TNA 79.71 back in March. So the loss was pretty substantial (-9.85%), but not as bad as it could've been I suppose.  I will have a system update post this weekend describing a new technique for determining the health of the market, and thus better identifying which code to use for calculating signals. Going forward, I think this will be a significant improvement.  I'm excited to see how it works.  Backtesting shows vastly superior results versus the previous method.  More details this weekend.  Hope you enjoy yours.

3pm:  Our entry price keeps getting better and better.   Loss on my short position is shrinking as well.  Buy signal is even stronger.  Just a few points away from my 1320 target. 

2pm: Still a solid buy. 

11:20am:  If the market closed right now, we'd be looking at a buy signal.  I'm not sure if it will last but I'll update prior to the close.

Hold confirmed.

4pm:  A rather dull afternoon of trading leads to another hold signal.  Small caps took a much bigger hit than the SPX.  Oh darn! :)  It's about time.  I'm still holding a huge TNA short position.  I would like to see SPX hit 1320 before exiting my shorts.  I think we can do it tomorrow.   My short term upside target remains 1350-60...although this is just a stupid silly guess.  

3:47pm: SPY close of 133.59 or higher will also trigger a buy signal. But it looks like neither will happen and we'll have another hold signal. 


1:37pm: Now that the high and low of the day have probably been determined, the math can be done to predict the signal.  A close equal to or lower than SPY 132.88 will trigger a buy signal.  Anything higher and I will continue to hold shorts. Ok, time to head outside and enjoy the nice weather...

11:36am:  Chances of a buy signal are getting better by the minute....

11:28am: There's about a 40% chance of a buy signal today.  If not today, tomorrow may offer another good buying opportunity.  Time will tell.  I will update with the ending signal before the close.

Short

4:05: A short signal was produced on the close.   Who has guts to short this market though?  It may just payoff for those brave enough.  Bullishness is getting extreme. 

Hold

4:15pm:  Oops, I got busy today and forgot to update my page.  Nothing new to report.  Still holding my short position.  Would love to see a retrace back to 1300 before heading higher.  Wishful thinking, perhaps...

Hold confirmed.

358p: Hold

I may get a signal to cover the losing short position I'm currently holding.  This would effectively sideline me and keep me out of the market until the next buy or short signal.  I'm not sure this signal will last into the close so I'll update later.

Patiently Holding

I'm now trapped big-time on my short position.  Looks like I'm going to have to wait it out a few days longer.   Drawdowns are a real bummer.  Official signal today will be another hold.  Enjoy your weekend!