What a lousy finish that was... I don't like to see that much selling going into the close when I'm about to short. Anyway, the first trade of the year was successful. TNA was up nearly 5%, although once again the system will only get half credit. :-/
3:30pm: The numbers are in...
My system goes short if SPY closes at 127.26 or higher. Below that, if it finishes between SPY 126.96 to 127.25 it will sell longs only. Below 126.96, hold longs. It is a strong short signal already by definition, but the higher we close above 127.26 the better. I would also like to see some better performance out of TNA although this is not a requirement today.
No further updates needed. Have a good evening!
10:39am: While I am kicking myself for not following my system and going long Friday, at least I half listened and dumped my shorts on the close.
I'm getting a strong short signal today. As I demonstrated over the weekend, taking a 50% short position here would probably not be as profitable as a 100% short position, but I also said I'd give this money management strategy a few more months. So, if the short signal holds into the close the system will sell longs and initiate a 50% short position in TNA.
I'm turning off the computer now and will be back at 345pm ET to confirm the signal and place the trades. I'm off work today so I think I'll go workout and perhaps help put all the Christmas stuff away - at least doing something useful besides watching what appears to be a relatively boring day transpire. See ya back here in a few hours. Take care.
J...I tried just putting Indian index value but there were no macros/formulas etc. So just putting them were not giving the same
ReplyDeletebuy/sell signals because when S&P is a buy doesnt mean the Indian market
has to be the same. So I am not sure
what you mean by just entering
index values in place of TNAs values in the spreadsheet. Your input appreciated. Thanks
I consolidated all 2010 and 2011 signals into 2 spreadsheets. I figured you could replace TNA with your Indian index values and then do some calculations on returns. I'm not quite willing to give out all my formulas yet. ;) I'm sure you understand. But if your returns are good with your Indian index, you're probably safe following my signals using something other than a US Index/ETF. If that's the case, please let me know b/c I'm interested.
ReplyDeleteCouldn't handle it could you... almost made it ;)
ReplyDeleteOnly an hour and a half early :D
Thanks for the update !!
J-trader
ReplyDeleteAre you going to use BGZ as your potential short vehicle?
Given the historical bullishness of small caps at this time of year.
RMI, Yeah yeah so I peaked. :-D At least I got all my stuff done I needed. Heh.
ReplyDeleteJ-trader
ReplyDeleteStumbled upon your site a few days ago. Interesting stuff, kind of you to share this here. I would like to try and follow your signals with in the money SPY options that are a few months away. SPY options have very tight spreads, provide both leverage and a stop loss and it would mean trading the instrument you perform your calculations upon.
Keep it up, Marco
Just curious, but why would you use options rather than futures? Futures have many fewer moving parts (for example, no time decay) and all the advantages of leverage (well, an advantage when things are going your way; not so good if not) and preferential tax treatment.
ReplyDeleteAlgyros, you have a point but I'm just dipping in a toe here. I'm not comfortable with the huge swings in account value even a single Emini contract can cause. For today's signal I have looked at the March 16th 129 and 130 put. Time decay on those is between 3 and 4 cents a day which is not that much considering that the the system flips quite regularly. And after all TNA loses value over time as well.
ReplyDeleteFor anyone wishing to see how various ETFs are correlated, here's a neat site: http://www.sectorspdr.com/correlation/
ReplyDeleteYou're right, Marco, about how rich even Eminis can be. But, you can easily hedge them. For example, if you want to invest $25,000, and since one ES contract controls about $65,000 of SPY, you go long one ES contract and short $20,000 worth of SSO.
ReplyDeleteI bought SDS calls today to follow this short signal. From a daily candlestick chart if there is a small range-bound day tomorrow (hopefully lower) I'll close out this position and then go long via SSO or TNA calls or let degradation work in my favor and pickup SDS / TZA puts ha ha ha (evil laugh). There is overhead resistance for SPY around 128ish that may need another attempt to break through but I think it will happen soon.
ReplyDeleteJ,
ReplyDeleteIn terms of the stats, how much difference was made in terms of exiting all of the position when switch to healthy/unhealthy compared to only exiting half of the position?
I will give a more specific answer tomorrow but from what i remember thru testing, the market bounced over 70% of the time after the flip, proving a better exit of the position.
ReplyDeleteThanks to Algyros, for recommending that great Correlation Tracker from S&P, see link above. Wow, a "neat site" indeed!
ReplyDeleteJust in several minutes of feeding in some ETFs, a whole nother set of insights into ETF and stock relationships emerged.
Who would have thought that IWM (US smallcaps) would have only a very mild 6-month correlation (+0.27) with XLU, the Utilities Spdr ETF-- while Intel Corp would have a surprisingly strong correlation of +0.79..? The exact same as Intel has with the tech Spdr ETF, XLK! I dont see why, my mind boggles at what would cause such relationships, and I have to give it some more thought.
I noticed that a near perfect inverse performance to a Brazilian smallcap fund (BRF) could be had by purchasing long Treasuries (TLT). That must have to do with Commodities vs. Paper Instruments or something.
I also noticed that EEM, ILF, EWZ, and BRF (emerging markets, Latin America, Brazil Large and Small) all moved in near total lockstep the past six months, so why bother with analysis? Just go for highest volume, and lowest bid ask spread. One would think there would be SOME wrinkle of difference, but 99% correlation is about as close to lockstep as it gets.
A nice crop of insights for a couple of minutes of noodling and testing! Again, that bookmark is a keeper, and thanks for the heads up.
Woohoo, TVIX has gone from +4% to negative...
ReplyDeleteFigures I would pick the wrong thing to be short in...
Exited my SDS calls this morning when I had the opportunity. With a big move up yesterday the best we could have hoped for was a consolidation-type small move down. That things are strengthening as the day wears on doesn't surprise me. Not sure if it's time to go long but being short is painful as of this minute.
ReplyDeleteYes Lance, it is...
ReplyDeletePainful is not exactly how I would describe this. TNA is down 1.5%.
ReplyDeleteTrue, but I went 50/50 TVIX/TZA and TVIX is down more than TZA is up...
ReplyDeleteMy choice, my pain... it's too early to worry about it :)
Painful if you were holding something other than TNA short. Interesting that shorting a large cap ETF like DIA or SPY was a bad move at the close yesterday but shorting TNA or long TZA was a good idea. I thought the short call was solid and put my money where my mouth is but I was sweating bullets this morning until I got out at even from my SDS calls. If I had stuck to your model and bought TNA puts I would have had a much better morning! My take away is that small caps are not performing as well as large caps in this environment. I've been reading that a lot so it makes sense. I'll remember that for the next trade long or short.
ReplyDeleteJ, was wondering if we should put break even stops on our trades once they are in the money to prevent losing trades?
ReplyDeleteIf you're wanting to follow my system verbatim, then never.
ReplyDeleteJ-Trader is right. I've seen countless numbers of people find a good system and then begin to take some trades and not others or add profit targets or stoplosses, etc. Unless there's good evidence (from backtesting) that this works, then I suggest you avoid it. Any deviation from a system constitutes discretionary trading. And, imo, if you're going to be a discretionary trader, then you should go all the way and learn technical analysis.
ReplyDelete