Monday, February 25, 2013

Holding longs...

I hadn't looked at a thing all day until 5 minutes ago. I was unpleasantly surprised! All systems will remain long XIV. I will maintain my 50% XIV and keep my other 50% still in cash. It may be nice to keep plenty of power dry just in case the selloff continues. Thanks.

 PS- UPDATE: JTS half stopped. Market is now UNHEALTHY. Strong rallies (that don't make a new high) should be shorted.

UPDATE #2: I see vix futures have slipped into backwardation, meaning XIV is probably not the best ETF to play any coming rally.  I will keep my XIV for now but will use TNA for any future purchases. 

22 comments:

  1. Thanks JT.
    I am bit surprised system is still long instead of cash or short but then again what do i know. :)

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  2. What does the fact that JTS is half stopped do to the JT Composite, especially the 100% version?

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    1. I would interpret it as go to cash.

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    2. Nothing, no stops in the JT Comp. In testing, stops hurt way more than helped.

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    3. With only few exceptions, the market tends to bounce (sometimes vigorously) after flipping to unhealthy mode, which is why it's only a half stop.

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    4. I'm still a little confused. Is the 100% Comp in cash?

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    5. JT Comp has no stops. It's long.

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  3. I should add that XIV closed way below its lower Bollinger Band.

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  4. J, today we got what I was expecting to get on 2/21 (see prior post from 2/21)... missed playing the long w/you Friday (and just sat through it), but am starting my longs now.instead. Leaving room to add -- the usual game. Will add on any gap down tomorrow. Covered a pile of shorts at the close today. Had those on long enough.

    Mkt's finally coming back alive again... sweet! Was really getting bored w/that low VIX crap.

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  5. J, if the market continues as it has today, what does your crystal ball say about the system?

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  6. I would think it is best that the minute you notice backwardation in VIX futures to exchange XIV for TNA

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    1. Another cause for concern for holders of XIV is the interest in VIX calls: http://vixandmore.blogspot.com/.

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  7. That's a good idea, Marco. I will personally do just that today if the 100% system doesn't take us to cash or short.

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    1. VIX down 11%. TNA up 2%. VXX is red, yet despite all these factors XIV is red as well. It would be comical if it weren't upsetting.

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    2. J, do you have any stats or ideas on whether VIX backwardation generally tends to act as a headwind for the market?

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    3. There doesn't seem to be much of a correlation between the VIX term structure and the direction of the market. This blog post by Michael Stokes addresses this issue: http://marketsci.wordpress.com/.

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    4. I've checked it a bit myself. The last times VIX futures were in backwardation % were very mild on 12/28/2012 and 5/18/2012 and marked bottoms. But the one before that, basically from 8/1/2011 until 11/15/2011 (more than 3 months!) saw backwardation of over 25% at times.

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    5. Thanks for the link, Al. Interesting piece.

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    6. There is a sweet spot. That is, if we've been in contango for at least 2 months, the first dip into backwardation is a ST bottom. All bets are off if it's been less than 2 months.

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  8. It is funny in a gallows humor sort of way. So, J, are we staying long?

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    Replies
    1. A little late, but yes we were! :) And it's working out well.

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