JTS Long?

If SPY closes 143.79 or lower the JTS and JT Comp will move back to 100% long. Otherwise no changes today. Thanks.


Sept Trades

Date	JT Composite	TNA	J-Trader	CCI
Aug 30	Long	55.52	Long	Long
Sep 3	Closed		Hold	Hold
Sep 4	Half Long	58.21	Sell	Hold
Sep 5	Cash	58.30	Hold	Sell
Sep 6	Half Short	61.57	Hold	Short
Sep 7	Half Short		Hold	Hold
Sep 10	Cash	62.04	Long	Hold
Sep 11	Cash		Hold	Hold
Sep 12	Short	63.36	Short	Short
Sep 13	Short		Hold	Hold
Sep 14	Short		Hold	Hold
Sep 17	Short		Hold	Hold
Sep 18	Short		Hold	Hold
Sep 19	Short		Hold	Hold
Sep 20	Short		Hold	Hold
Sep 21	Short		Hold	Hold
Sep 24	Half-Short	64.93	Hold	Cover
Sep 25	Long	62.29	Long	Long
Sep 26	Long	60.91	Long	Hold
Sep 27	Cash	62.95	Short	Hold
Sep 28	Cash		Hold	Hold

JT Comp back to cash.

The CCI system will remain long but the JTS is shorting this rally. This is a neutral set up and I'm taking profits and happily moving back to cash. This ends the best 3 day streak of the year, which saw my total account value rise by nearly 15% and puts me back to an all time high. Take care and I'll see you back here tomorrow. Cheers!

Long

The JTS is giving a more convincing buy signal. I've unloaded all my TZA and will be taking a large position in XIV. Thanks!

100% Long

All systems move to 100% long positions today. Hopefully today was just a shakeout of weak longs and we continue up from here. Was hoping TZA would hit 15 before any buy signal, but looks like it'll come up short. Oh well...Thanks and good luck all!

CCI covers.

The JT Comp system moves to 50% short. The JTS remains 100% short while the CCI moves all cash. I will cut back a small portion of my shorts but still maintain a large position. Thanks.

Hold.

All systems remain short. Have a good weekend!

Hold

Still nothing new. All systems remain short. Thanks!

Still holding.

No changes again today. All systems remain short. Feels like this market is going to make a decent sized move soon. I would guess the move would be down, but I've been wrong a few times in my life. :) See you tomorrow!
J

Holding.

JTS, CCI, and JT Comp all remain short. This boring consolidation seems bullish to me, but I'm continuing to follow my systems and hold the short position. Only time will tell if it's the right move.

Thanks.

Holding shorts...

All 3 systems remain short. Hopefully TZA will continue its upward march again tomorrow... See you then.
-J

Holding shorts.

All systems remain short. I will hold my 100% shorts over the weekend. I think TZA will make a 10% move to the upside within the next 1-2 weeks. Of course, it doesn't matter what I believe, nor am I qualified to give investment advice. But today or Monday is a short term top...

Hold.

All systems remain short. Not a great day to be short although I suppose it could've been worse. As planned I added to my TZA position. Thanks to helicopter Ben, I will probably regret this...

All-in short..

All systems are going 100% short today. I will be taking a sizable short position on the close, and will add to it tomorrow if the bullish FOMC day tendency plays out.

Thanks and good luck to us!

No changes.

The JTS remains long, the CCI short, and the JT Comp in cash. Thanks!

JTS Buys. JT Comp to cash...

The JTS gives a healthy buy signal but the CCI remains short since 9/6. This kills the JT Composite short signal and moves it back to 100% cash. Hope you all had a good weekend.

JTS not shorting.

The JTS still detects too much upside risk to short. The CCI on the other hand is expecting a pullback and is producing a 2nd short signal. I don't have stats on it, but 2nd consecutive CCI short signals have a good risk/reward setup. I'm taking some short exposure today via some TZA. I won't get too carried away until JTS hops on board, which may or may not happen next week. We'll see. The JT Comp remains unchanged, holding 50% shorts and 50% cash.

Have a good weekend!

CCI going short...

The CCI system (which unofficially has been a day early lately) is going short on the close. The JTS will remain sidelined in cash. Thus, the JT Comp system is moving to a 50% short position on the close using TNA (short) or TZA. With VXX down 10%, it would be tempting to play for a bounce there, but contango is too strong and it could just as easily keep sinking into the abyss.

I'm as disappointed as anyone to have not caught this move in XIV. But on the bright side, we were safe in cash and lost nothing. I know that's little consolation. Oh well, that's trading. See ya tomorrow!

CCI Sells. JT Comp to 100% cash.

We saw the JTS move to cash yesterday, now the CCI is following suit. The JTrader Composite system moves to 100% cash on the close today. So far, so good with XIV. See ya back here tomorrow. Thanks.

JTS sells.

The JT Composite system scales back to 50% long. The JTS moves to cash while the CCI remains long. Thanks.

Welcome XIV and VXX...

I am introducing another element to my webpage/system next week. I've been wanting to incorporate XIV and VXX into my trading, but only when conditions are favorable. These are not leveraged vehicles, but since VIX can make some big daily moves, trading them can be rewarding. Not only are their prices affected by VIX movement, they are also at the mercy of the VIX futures structure...contango and backwardation. While I can't predict what the VIX will do on any given day, I can be aware of whether we are in a contango or backwardation environment.

A friendly warning, if you have a short attention span...skip to the conclusion! :-D

A long time follower pointed me to a website called vixcentral.com. On this page I was able to find the current and historical VIX futures structures. (Many thanks, btw!) With this data, I was able to identify periods of Contango, Strong Contango, Backwardation, and Strong Backwardation.

But first, we have to understand contango and backwardation and how they can affect XIV (and VXX). You can simply Google research contango and backwardation, but to shed some light on the interaction with XIV, Rob Hanna, founder of Quantifiable Edges and the newly introduced Overnight Edges, had this to say back in July...

“...but there is a 2nd factor that strongly influences XIV prices, and that is the VIX futures term structure. This is because XIV looks to maintain a constant-maturity short position. To do so it must buy to cover a certain number of front-month VIX futures each day and then short an offsetting amount of the 2nd month. When the 2nd month is priced above the front month that is referred to as “contango”. The stronger the contango, the more beneficial the term structure for XIV. To understand why this is beneficial consider tonight’s closing futures prices. July closed at $19.25 and August closed at $21.20. So XIV is buying at $19.25 today and selling at $21.10. Buying low and selling high like this can be quite beneficial to its value over the course of an entire month... ...the 10.1% spread between the front 2 months will have a positive influence on XIV’s price.”

Sounds good, but can a 1x leveraged XIV really compete with a 3x leveraged TNA? With contango on its side, you bet it can! Here are some tested results that I ran. First, during periods of strong contango.

Test 1: Buy TNA and XIV when VIX futures move to Strong Contango, sell when it exits to a different category. Starting amount: $10,000 each.

Final amount TNA: $12,023
Final amount XIV: $29,853

Results speak for themselves, wow!! XIV absolutely crushes TNA. (FYI: we are currently in a strong contango environment!)

Test 2: Ok, how about periods of (weak) contango. Again, starting at $10,000.

Final amount TNA: $11,966
Final amount XIV: $14,088

XIV wins again, but in a not so dramatic fashion. Still respectable!

Test 3: Backwardation (weak). Starting with $10,000.

Final amount TNA: $7331
Final amount XIV: $5754

XIV loses, as one might expect. However, let's pit TZA up against VXX during Backwardation...

Final amount TZA: $11,500
Final amount VXX: $14,122

And for fun...Let's let UVXY (2x VIX) in on the action.

Final amount UVXY: $10,456 (decay kept it from beating its 1x counterpart)

So during backwardation, it appears VXX beats TZA and UVXY. I should mention that UVXY hasn't been around a long time so it's not a very fair comparison. I am still going to avoid using it... Too dangerous for me.

Test 4: Strong Backwardation. This environment doesn't happen very often. And often after a prolonged period of strong contango, if we dip into strong backwardation, it's a great BUY (TNA) signal!

Final amount TNA: $9196
Final amount XIV: $6003
Final amount VXX: $12,935
Final amount TZA: $6354
UVXY - Not enough data.

With strong backwardation (which usually accompanies a downtrending stock market) we see VXX destroyed the decay-happy TZA.

Conclusion
When we are in a contango environment, I will favor XIV over TNA for any long signals. Short signals will continue to utilize TZA.

During backwardation, I will favor VXX over TZA for any short signals. But will continue to use TNA for buy signals. I will not touch XIV during backwardation, nor will I touch VXX during contango. And, I will never touch UVXY during either backwardation or contango. :)

I will update the webpage to list which VIX futures structure we are in (currently "strong contango") and will also display the 2 ETF's I will be favoring for system trades. Currently XIV (long signals) and TZA (short signals).

There is more work to be done, although I won't get to it anytime in the near future. Someday I will plug in this new configuration into my system and run some tests using TNA/TZA/XIV/VXX rather than just the TNA/TZA. I shudder to think how much work this will be! Lol. Additionally, I can see myself updating the webpage to track stats using all 4 ETF's but for now will just keep it simple tracking just TNA.

Here is what the current strong contango VIX futures structure chart looks like. (From vixcentral.com)











And backwardation from last August. VXX would benefit substantially over TZA. Likewise, TNA beats XIV for long/buy signals.











Thanks for reading.... have a great Labor Day!