Monday, December 24, 2012

MO2 View... 12.24.12

As we move forward into the new year there will be an increased focus on pair trading (MO2) research...both inverse pairs (such as QQQ/SH) and correlated pairs such as (AAPL/IBM). There's a reason that some of the largest proprietary trading shops (like Bright Brothers) use pair trading as their main trading mode when not playing arbitrage on the open and the provides much better odds for success than simply trying to guess directional moves.

MO2 has a live data feed and here's a look at today's QQQ/SH signal...also the focus of our VTV model, but obviously using an entirely different set of metrics to analyze the trade potential.  We're into the QQQ short trade 7 days now and with a predicted optimal excursion of 9 days, it's getting close to exit time.
This optimal time window ("N- Days") is critical and the failure of the trades ending on 08/30 and 12/05 can be traced directly to dallying too long and not cutting the trade off after 9 days.

As far as the near term picture for the markets...we have the last day of the month bullish potential fast approaching versus the realization that we may go over the the fiscal cliff.  If there is ANY remedy to the crisis its likely to be stop gap and not far ranging or long the markets will likely continue to climb the wall of worry. 

We continue to be in a cautious mood and today's action where QQQ and TLT are both in the red reflects the ongoing technical confusion in the markets