Wednesday, August 21, 2013

Another View of XIV...8.21.13

Midday it looked like the markets were going to follow through on yesterday's modest rally....and then the trap door opened and the markets came tumbling down into the close.  Of particular note...most of the closing imbalance order were on the SELL side...that means market makers were struggling to find buyers for their SELL positions and were trading on the BID, not the ASK prices.

The volatility can probably traced to the FED and the uncertainty of the equity damage a pullback in quantitative easing would create.  No one wants to be long through another 2008-2009 collapse.

Since you asked...thanks to Jim L. for the suggestions on XIV variations.  Here's what happens when we add XIV (the VIX inverse) to the T11 hybrid model and pull UNG (natural gas from the mix).  This is a top 2 sort and note that XIV has been slowly migrating away from the top slot since 8.13. 
The short term performance metrics (5-90 days) of this model have certainly been attractive and what's interesting is, despite the negative slope P6 in most of our other study portfolios, this P6 is upslope (its not parabolic) and looks poised for possible additional gains.