Sunday, February 10, 2019

PONZO Updates for SPY, QQQ and TLT....02.10.2019

Here are the February PONZO forecasts for our index targets...SPY, QQQ and TLT.
Comparing the new forecasts to last month suggest a weakening market in both equities and bonds for the next few months.  This has been somewhat supported by the generally weak tone and forward guidance of recent earnings reports, especially in some of the big tech names.  Industrials are also under pressure while the FED remains the 800 pound gorilla in the bond/treasury market.

Tuesday, February 5, 2019

Delta Neutral S&P model with Schwab inputs....02.05.2019

Here's a way for Schwab users to trade an S&P based DN model and only incur modest commission fees as SCHB (the SPY ETF proxy in Schwab) trades commission free.  Schwab doesn't have an SH proxy (the inverse for SPY) so for now we still have to use the ProShares ETF. 
Performance metrics of this model precisely match those of a SPY/SH pairing so save a few bucks and use this version instead. Max drawdown is extremely low compared to the benchmark.

Sunday, February 3, 2019

Delta Neutral Update for QLD/QID and a dollar/euro pair study

As mentioned previously, the recent decline in volatile as reflected in the ATR and OC spreads has limited our delta neutral equity curve.  We can get back in the game by simply lowering the limit stop per our "best odds" value and, really, the only risk we incur is opportunity costs when the market opens above/below our limit stop and the trades never get triggered.  For now we'll hedge our bets a bit and stick with a slightly elevated limit stop value as compared to the "best odds'.

Also, see below, an update to our classic dollar/euro pair trade using the Z-score analytics.
This is not strictly an either/or trading model...we just look for which side of the trade has the greatest probability of reversing and assume (generally correctly) that the the other side of the pair will react inversely. Pretty good odds on this model with a lookback of 6 months we've had 23 trades, 18 of which have been winners. so a 18/5 win/loss with only minimal drawdown.
Click on chart to enlarge.

Tuesday, January 29, 2019

A Delta Neutral 20 Year Treasury model...01.29.2019

Looking to increase our toolbox of DN models in order to diversify income possibilities's the TLT versus TBT model.  Keep in mind TBT is leveraged 2x inverse to TLT so the limit stop has to be double TLT and the trailing stop also has to be double TLT's.  The linearity of this model is truly outstanding and the overall max continuous drawdown is also attractive...especially when you consider the equity curve of the benchmark TLT when seen in a buy and hold situation.

Sunday, January 27, 2019

Update for Delta Neutral....01.27.2019

Returns have flattened out on the QLD/QID delta neutral model as volatility has followed a decline.
It's still my go to model in this environment of uncertainty and now earnings season is kicking off so expect some sparks.  Just for comparison I've included the metrics for a 1 beta DN model trading SPY against SH (the ETF SPY inverse).  Again, this mode has a value of 1 beta while the QLD/QID model has a beta value of 2.

Tuesday, January 22, 2019

PONZO Update for TLT and an XLU butterfly....01.22.2019

Here is the last of our PONZO toolkit...TLT...the 20 year Treasury long ETF and another of our favorite butterfly plays.
As mentioned yesterday a possible XLU butterfly debit setup is shown below.  As with most butterfly trades risk is limited and little trade maintenance is required.  This is a 3 week trade with nice odds unless the market really tanks....always a distinct possibility in this volatile environment.

Monday, January 21, 2019

PONZO Updates for XLF and XLU....01.21.2019

Following last week's PONZO forecasts here are the last 2 sector ETFs we will be tracking for a while...XLF (financials) and XLU (utilities).  XLF has been hot for the last week but PONZO suggests a cautious or hedged position near term.  On the other hand XLU looks especially promising for butterfly traders ....a strategy that has been a consistent money maker over the last 2 years.
Tomorrow we'll look at a couple XLU butterfly and debit....using our PONZO generated support /resistance bands.