Thursday, October 25, 2012

T 3 Update.. 10.25.12

T3 is managing to keep pace with the SPY drawdown, but it's failure to shine a little better is a cause for ongoing ways to increase net returns.  As daily volatility increases the momentum algorithm may have to be speeded up to reflect this reflect this volatility and prevent the whipsaws that will otherwise negatively impact our equity curve.

I mentioned this the other day but note the break of the SPY TrendX in the right hand panel (this is running in real time).  Today's dramatic reversal of the NYAD from an opening value of 6.35 to the current level of .98  is a classic "pop and drop" gap failure...typically with bearish implications.

Given the rising instability in the markets I'm following the lead of the Mosaic RM models and adopting a 75% cash position with the Situations until structural alignments in the markets (equities vs. bonds) regain a balance.  This means closing the my Situations position from 10.12.12 (TLT, XLU,AGG) this morning at 8:30 AM.

For shorter term situations the current DB, GS2 and MRSI signals are distinctly negative and since our stated policy is not to publish short signals any new Long Alerts have been absent for the past week.

This weekend I hope to present a new T2 model with risk control stops to help avoid the recent drawdowns we've experienced recently. It's still a work in progress, but that's the goal.