Now that the system is long, we have to hope the top was not in, or at the very least that we revisit the highs before turning down again, thus providing us an opportunity to profit from the long position. The stop loss has been set for the swing low of Jan 30 which was around SPX 1300. Anything below 1300 and we'll have a clear expanding megaphone pattern on the daily chart, which will be our first warning sign that a swift move downward could be approaching. (As long as we remain above 1300, the odds are in favor of the bulls.) Personally, it is my opinion that this rally is not over yet. I believe it has another month or 2 to go. I think we may pause here for a few weeks, but ultimately I see us climbing higher to suck in more bears. There is still too much bearishness out there, don't you agree? Thinking back to April 2010 after several months of rallying, there was nary a bear to be found. I know I sure wasn't feeling bearish. We all know what happened May 6th that year. I think that's what's in store for the market IF we don't see a decent (healthy) pullback soon.
Now some more important news...
I've recently started doing some exciting research with one of my favorite indicators, the CCI. According to the rules I've developed (which are very simple, btw), it also happened to give a buy signal on Friday. I made up these simple rules based on the last few months worth of data and when I back tested it using 3 years of data, buy signals had a winning rate of over 90% with an average gain of over 4% per trade. (using TNA) I was shocked, understandably. It offers about 15 long trades per year and only about 8 short trades per year. I'm seriously considering incorporating it somehow into my current system. That is what I'll be working on and testing over the next few weeks. I will post more info in the near future should the testing prove successful. That said, I'm hesitant to make changes to something that's not broken. At the very least, I'm thinking I could use the CCI system to possibly verify or confirm my signals, so to speak.
Finally, a quick update on stats... we are almost 1.5 months into the year and my system is doing a respectable job. Not great, just ok. I'd give it a C+ or B-. Obviously, I would've liked to capture more of the rally (TNA is up 31% since Dec 30!) but it's not perfect and definitely performs better when volatility is elevated. It is currently up 4.11% for the year after a rocky January and a pretty solid February. And remember, this buy signal yesterday has a 90% chance of making us another 4% this week!!! Hehe, I jest (sort of). :)
Take care and Gold Bless!
Sounds interesting and promising at the same time. Using that as a barometer for verification / strength might prove to be very beneficial. Good luck and hope the tests can keep that 90%.
ReplyDeleteInteresting. I came to pretty much the same conclusion based on my reading of the Ticker Sesne Blogger Sentiment Poll (http://tickersense.typepad.com/ticker_sense/). Over the course of the past few weeks, while bullish sentiment has clearly increased, bearish sentiment has not budged. I'm keeping the running count in my blog post here: http://nightowltrader.blogspot.com/2012/02/tuesday-bit-lower-but-watch-greek-news.html>
ReplyDeleteI'm also interested in your use of the CCI. I used to use that myself but ultimately gave up on it as lacking in predictive power. Perhaps it's time to revisit this indicator.
Well tna was up 4% on the open. Perhaps I should include a 4% profit as a sell signal for my testing.
ReplyDeleteMust be a close one today.
ReplyDeleteNot too bad, I'm just busy with other stuff. Thanks.
ReplyDelete