Holding.

After waiting 4 days, there is nothing new to report with my systems. They are all producing hold signals.  Hope all is going well with you post-Sandy.

I was considering an AAPL purchase, due to a few reasons, mainly b/c it was bouncing off its 200 day.  I don't have much time to post stats, but after having been above the 200 all year, the first test is statistically bullish.  I'm counting on a 5-10% move to the upside in the next few weeks, but I'm not ready to buy any today.

I remain 25% long XIV.  See you tomorrow. Thanks!

Oct Signals

Date	JT Composite	TNA	J-Trader	CCI
Sep 25		62.29		Long
Sep 28	Cash	62.95	Short
Oct 1	Cash	62.15	Cover	Sell
Oct 2	Half-Long	62.31	Long	Hold
Oct 3	Cash	61.93	Hold	Short
Oct 4	Cash		Hold	Short
Oct 5	Cash		Hold	Hold
Oct 8	Cash		Hold	Hold
Oct 9	Long	59.61	Long	Long
Oct 10	Long		Hold	Hold
Oct 11	Long		Hold	Hold
Oct 12	Half-Long	58.46	Hold	Sell
Oct 15	Cash	59.70	Sell	Hold
Oct 16	Half-Short	61.05	Hold	Short
Oct 17	Short	62.67	Short	Short
Oct 18	Short		Hold	Hold
Oct 19	Cash	57.87	Hold	Long
Oct 22	Cash		Hold	Hold
Oct 23	Cash		Hold	Hold
Oct 24	Half-Long	56.55	Cover	Long
Oct 25	Half-Long		Hold	Hold
Oct 26	Half-Long		Hold	Hold
Oct 29	Half-Long	Closed	Hold	Hold
Oct 30	Half-Long	Closed	Hold	Hold
Oct 31	Half-Long		Hold	Hold

Hold signals.

Nothing new again today, I was getting a JTS buy signal when SPY was below 140.75 but I make it a rule to ignore intraday signals.  (Signals are only valid on the close.)   The JT Comp remains 50% long XIV.

Not sure what Monday will look like.  If I had to guess, I'd say we are done going down and now it's time to bounce back up to test the 50-day next week.  We'll see.  I'm still holding a 25% XIV position.

Cheers!

Staying put.

CCI is a hold signal.  JTS is still not interested in going long yet.  Therefore the JT Composite remains 50% long and I'm gonna stay safe and just keep holding my 25% long XIV position.  (No additional purchases today.)  Thanks!!

JTS Covers. JT Comp 50% long.

The JTS is covering its short position finally, but will not go long today.  The CCI is offering up a fresh buy signal. This combo moves the JT Composite to a half-long/half-cash position using XIV.  The VIX futures term structure remains barely in contango.  If it flips, I would switch to using TNA for longs and VXX for shorts.

Personally, I don't trust this market right now and I'm keeping my long position on the small side... @ 25%. I'm often wrong, so don't listen to me! :)
Thanks,
J

No changes.

Systems will hold their current positions.  That keeps the JT Comp and myself in cash.  Contango is no longer strong, but not in backwardation yet.  History suggests a good time to buy stocks is when VIX futures slip into backwardation after such a prolonged period in contango.  We are not quite there yet. 

See you tomorrow.

J

Buy if...

The CCI will remain long with a hold signal.  The JTS will go long if SPY closes 142.73 or lower.  That would place the JT Comp 100% all-in long XIV.  Otherwise, the JTS will remain short TNA and the JT Comp will remain sidelined.

If we get a long signal, I will purchase some XIV, but not 100% at this point.  Perhaps 50% ish.

Thanks!

System Update - Profit Curves

Al asked for some up-to-date profit curves.  Ask and you shall receive.  I ran them back to the beginning of 2012.  For curves going back further, please check the "Updates" link above.  I used TNA to calculate the curves.  Using XIV would've resulted in slightly better returns, but I'm too busy to run those numbers.  As I mentioned before, I'll start tracking volatility trades in the official stats next year.

To summarize, the JTS (which is my baby, so to speak) is performing the best.  I really see only 2 poor months - April and May - when the market experienced some turbulence. Since the end of May, the system has performed better than I could've hoped. One could argue August was sub-par, but August was extremely boring.

The CCI has had some issues this year, but is still performing admirably.  Sustained moves in 1 direction with no mean-reversion will hit this system hard.  It thrives in a mean-reversion environment, and did well February through July.

The JT Composite system, which is simply a combination of the 2 above, is what I follow most closely.  It reduces risk while offering handsome rewards.  With such a nice, relatively smooth rising profit curve, I see no reason to deviate or doubt the system.

Ok, enjoy the evening and I'll see you tomorrow! 
-J

(click to enlarge)

Year-end Game Plan

This is mostly for fun, as I still plan on following my Composite signals.  But after some various research, this is my best guess for how the rest of the year will play out.  I believe the first downside target, before any meaningful bounce, will come around SPX 1400, ie on a 9/6 gap fill.

The ensuing bounce would take us back up to the 50day, which also should coincide with broken support turned resistance.  SPX 1430 ish

The next decline would be all the way down to the 200 day moving average at 1380ish.  Perhaps occurring sometime in November.  The timing I'm not sure of, but the levels I'm fairly confident.  Finally, we bounce off the 200 day into year end. But ultimately I believe that rally fails early 2013. 

Anyway, those are my thoughts.... feel free to agree/disagree in the comments section.  Thanks!

I'll post a chart so we can critique it later on... Enjoy the rest of the weekend. Go Browns!

JT Comp to Cash

The JTS will remain short.  The strict requirements to flip it long in an unhealthy environment were not even close to being met today.  However, the CCI is going long here due to the magnitude of the drop.  It is expecting a dead cat bounce early next week. 

The disagreement between the 2 models will send me and the JT Composite back to cash.  I will happily take the profits here.  My only regret is not sticking with TZA to short.  Oh well, not going to complain.

Stepping back to assess the situation/damage....  Despite the large move in the VIX, the VIX futures still remain in strong contango.  This may set up a nice XIV trade sometime next week.  But I will be careful longing next week due to poor seasonality - next week does not look good.  Meanwhile, liquidity via the Fed is still strong.  Overall, I'm not enthusiastic about the long side but some more down days next week may change my mind.  

Here is seasonality next week via sentimentrader and tsptalk.  Monday is Day 16 on the chart.  Have a great weekend! Enjoy the big win!!! 

Hold

10/19 update: As of 2:45PM ET, the CCI will go long, but the JTS will stay short.  Back to cash on the close after this fabulous day. :)
 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
All systems remain short. Thanks!

JT Comp 100% short.

JTS fires off a short signal today.  CCI is already short, but is showing another short signal today. So the JT Comp moves to 100% short and I will increase my short position as well.  Normally I would buy TZA here, but since I'm short the SPX, I'll just buy more SPXU.   I'm going ~75% short, saving a bit of cash in case of more upside the rest of the week.

Thanks and good luck!

Edit: A green SPY close Thursday or Friday will turn the JTS back to healthy mode. 

CCI short.

The JT Comp moves to 50% short as the CCI gives a short signal today.  The JTS is generating a hold signal keeping it in cash.  I've already purchased my shorts for the day, utilizing SPXU rather than TZA since small caps are under-performing today and are thus more likely to jump harder on any continued strength.

The bad tick "target" at SPY 145.61 was achieved today which is what I used as my entry point for my shorts. 

I'm thinking today could be similar to May 31, 2011 as far as the CCI system goes.  See the attached picture.  We also may have a kiss of death today where we retest a broken uptrend line before moving lower again.  Time will tell.

Best wishes whatever you decide to do...

Top Chart: Today
Bottom chart: May 2011

JTS sells...JT Comp to CASH...

10/16 Update: The CCI system is going short today.  I don't think the JTS will, however.  I've added my first lot of shorts already using SPXU.  TZA was not oversold enough for my liking.... Wish me luck.  Right now, it feels like I'll need all the luck I can get. 

More later...

------------------------------

The JTS will sell its existing long position.  This combined with the CCI already in cash puts the JT Composite system back to 100% cash.   I'm following suit here, selling my 25% XIV position prior to the close.

The plan is still intact.  I will hope for a pullback the next few days but will not go short until/unless I get a short signal.

Thanks!

Switching CCI modes...

Here are the instances in the past 2 years showing what happened when the 21MA of the CCI dipped from positive to negative.  Before I begin, a little disclaimer: Occurrences are quite low @ 6 so take this with a grain of salt!  I did go through data back to early 2008 (not shown here), and they are all similar to charts below. 

Everytime, the market put in a short term bottom within 0-4 days and bounced significantly, including the instances not shown.  TNA returned 10% to 28% from the bottom holding for 5 days. The exception was chart 2 below where it topped on day 4 and dropped hard day 5.   XIV did ok, but if we get into backwardation like in Aug'11, it will under-perform.  See pic 3.   For this reason, my first few long purchases this week will be XIV,  but will switch to TNA on Weds/Thurs if we keep dropping.  Most of these bottoms occurred below the gray shaded bollinger band.  I would like to see something similar this time before I get heavily long.   I'm guessing our bottom could come around 1400 before the big bounce.  I will get very aggressive down there.  Otherwise, if we go up this week, like pic 2 below, I will unload my current 25% long position and begin building shorts this week. 

This is my trading plan for the next 1.5 weeks and I will likely be disregarding my signals.  We'll see how it goes, though.  See you tomorrow.

Unhealthy, Short-Biased, & The Plan

The JTS flips to unhealthy mode, which stops out half its position and changes the internal dynamics of the model, making it easier to generate short signals and harder to generate longs.   Meanwhile, the CCI coincidentally flips to "short-biased" mode, which unlike the JTS, means very little.  However, one built in feature of the CCI system is that as a precaution, it will sell any long position on the transition.  This means the JT Comp will move to 50% long on the close.  (JT Comp ignores the JTS half-stop).

Now...THE PLAN
I am cutting back to 25% long XIV/75% cash.   There is a good chance we will continue to sell off early next week.   (If we don't, it will be a good shorting opportunity.)    We have been healthy for ~90 consecutive trading days and "long-biased" according to the CCI for about 80 days in a row.  After such a run, it's highly unlikely the market will just take a straight dump south from here.

I've gone through past data to see how the market reacts after flipping to these negative modes after being positive such a long time.   I will try to put together a weekend post detailing each case, but here is a quick study for your consideration. 

Using only the past 2 years for SPY (I can go back farther this weekend), when CCI flips to "short-biased", the average number of days until a short-term bottom is achieved is about 3 days.  (Shortest time was 0, longest was 4 days until bottom).  Buy at the bottom and hold for 5 days - Avg SPY return is 5.59%.  Best return 8.77%, worst return 2.24%.
 
So the only tricky part here is figuring out if the bottom is today or someday early to mid-next week... The best way to play this is an average down strategy.  Here is my plan.  I'm going to hold a small position over the weekend and if we get a big drop early next week, I will get longer.  If we continue dropping into Weds-Thursday, I will go hardcore 100% long.  I will exit the position the following Wednesday Oct 24th.  Using leveraged and/or volatility ETF's, a bottom to top trade should be able to net at least 10-20%.   If we rally hard next week, I will scrap the plan.  In that event, we will surely get short signals from both models that should carry very good odds of being winners.   Obviously, I'm favoring mean reversion right now.  Good weekend!
 
 

Cash, if...

The CCI will remain long today.  The JTS could produce a short signal if SPY closes 143.75 or higher....in which case the JT Comp would head back to cash.  If 143.75+ is not met, the JTS and thus the JT Comp system will remain 100% long.  Thanks!

Getting longer...

Both systems will hold their long position keeping the JT Comp 100% long.  As long as we remain healthy and long-biased according to my two systems I will continue to add to my XIV position.   Not sure why the VIX is down nor do I know if this is good or bad... Arguments could be made either way. 

Take care and we'll see ya tomorrow.

Buy signals.

Both the JTS and CCI are going long today, which generates a 100% long JT Composite signal utilizing XIV.   I will be a bit more cautious here going around 50% long/50% cash just in case we see more weakness the next few days. 

The half-stop on the JTS is now SPY 142.95.  A drop below that value would shift the JTS into unhealthy mode for the first time since early June. Normally, a dip into unhealthy territory after such a prolonged stretch of healthy conditions turns out to be a great buying opportunity.

Another possible target showed up today, which you may have seen if you were watching...

Holding...cash

All systems are producing hold signals....keeping the JTS long, the CCI short, and the JT Comp in cash.  Thanks!

Possible Target & Stats...

Action in SPY on Friday was interesting in that it nailed the exact price advertised by a phantom bar (or a bad tick) that had occurred on Thursday.  Near the end of trading Friday, another bad tick/p-bar showed up back up at 146.81.  These "targets" seem to get taken out more times than not, so it wouldn't surprise me to see a move up sometime this week.

(Click to enlarge)

I had a chance to update stats.  For simplicity and consistency, I just used TNA for long and short trades.  I will incorporate XIV and VXX (depending on contango) beginning in 2013.  Had I used XIV for longs in Sept, returns would've been higher.  I had a pretty good finish to September thanks to XIV despite being down much of the month.

Cash.

We had a strong JTS short signal this morning but lost it due to intraday weakness.  Now the JTS is producing a hold signal keeping it long, while the CCI remains short.  This keeps the JT Composite system in cash.  I should have time this weekend to update stats for those that were wondering.  See ya Monday.

Cheers,
J

Still cash.

The JTS will stay long while the CCI will remain short with a 2nd consecutive short signal.  Tough call for tomorrow with the jobs report on tap - not sure what way it's going to break.  I'll remain patient on the sidelines alongside the JT Comp.  See ya tomorrow. 

And back to cash...

While the JTS will remain long, the CCI is shorting on the close.  This neutral set-up puts the JT Comp (and myself) back to all cash on the close.  Interestingly, it's not an average CCI short signal in that the indexes are not overbought, but rather this continued weakness is hinting that a sizable drop is becoming more likely.  The lack of a meaningful bounce at these levels is putting the CCI in defensive mode.  Careful shorting here however as it may be a day or two early yet again.  I will not be shorting. Liquidity remains too strong and the trend is still up for the most part.  We may simply be consolidating here before the next move higher.  I will not get too excited about shorting until the JTS fires off a signal as well.

Take care!
J

Half Long if...

The JTS will order up a buy signal if SPY closes above 144.30.  If that requirement is not met, the system will remain in cash.  The CCI will stay in cash regardless.  In other words, the JT Comp will move to a half long position with an SPY close of 144.31 or higher.  Otherwise, it remains in cash.

Since we are in a strong contango environment I will opt once again for XIV rather than TNA for this potential long trade.  I will look to use about 1/3 of my capital on this trade even though 1/2 is suggested by the JT Composite system.  The other 2/3rds I will keep safe in cash for now.  

Thanks!

Cash

Both my systems (JTS and CCI) are absolutely clueless with respect to the next move in the market.  The CCI system is selling its long position and cautiously moving to cash, possibly warning of an impending swift move downward.  On the other hand, the JTS is covering its short position and also moving to cash, hinting that we may go up from here.  All this indecision keeps the JT Composite system 100% cash.  That's where I'm at also.  For the first time this month (*wink*) I have no feeling one way or the other where the market is headed in the short term.  I'll sit on my hands for another day - at least.  While I generally don't care for sitting out, this time I don't mind so much.  Happy trading or waiting!
J