Interesting market this morning. Everyone is expecting a decline, but both ES and NQ are up. However, the small caps, and TNA, are down.
Hence, my question about the system: on a day like today, until now, that is, is it purely chance that TNA is down while SPY is up? In other words, are we having a bit of good luck and nothing more, or is the system somehow attuned to the divergence between SPY and TNA?
Small caps have been weaker relative to the broader market since roughly mid-February. I think that's the source of our current "luck". It would be interesting to know how these two are linked in this model---I wouldn't naturally apply current moves in SPY to the future of TNA.
Well, according the correlation tool link that I posted a while back, SPY and TNA are actually very closely correlated, more so than SPY and QQQ. But, the correlation isn't 100% (more like 90%), so there will be divergences.
Decreasing participation and under performance by lower cap names are not unusual at market tops. What we are observing does not have to be any more complicated than this.
J- To my knowledge, no system can anticipate news driven events that drive the market in a certain direction. What is important is being able to determine high probability entry/exit points to be profitable. It really doesn't get any better than that and I believe the current short position is a good one. Thanks!
Wish we were long, but I see this trade turning around for us real soon...
ReplyDeleteIf not, is there a stop? We are real close to a 10% right now...
Interesting market this morning. Everyone is expecting a decline, but both ES and NQ are up. However, the small caps, and TNA, are down.
ReplyDeleteHence, my question about the system: on a day like today, until now, that is, is it purely chance that TNA is down while SPY is up? In other words, are we having a bit of good luck and nothing more, or is the system somehow attuned to the divergence between SPY and TNA?
Small caps have been weaker relative to the broader market since roughly mid-February. I think that's the source of our current "luck". It would be interesting to know how these two are linked in this model---I wouldn't naturally apply current moves in SPY to the future of TNA.
ReplyDeleteWell, according the correlation tool link that I posted a while back, SPY and TNA are actually very closely correlated, more so than SPY and QQQ. But, the correlation isn't 100% (more like 90%), so there will be divergences.
ReplyDeleteDecreasing participation and under performance by lower cap names are not unusual at market tops. What we are observing does not have to be any more complicated than this.
ReplyDeleteJ-
ReplyDeleteTo my knowledge, no system can anticipate news driven events that drive the market in a certain direction. What is important is being able to determine high probability entry/exit points to be profitable. It really doesn't get any better than that and I believe the current short position is a good one. Thanks!
Thanks all...TNA being weaker is mostly just luck.
ReplyDeleteAnyway, now that the system exited the short position today, be prepared for the market to tank. That's my luck. :)