Tuesday, September 30, 2014

Looking for Mr. Goodbar....9.30.14

Looked like there was bullish hope at the start but momentum got derailed and indices finished mixed.  We re-entered VXX based on our new re-entry level and picked up a few cents but we're ready to bail out again if the bull rears his head.

Monday, September 29, 2014

Instability Evident...9.29.14

Last trading day of the month tomorrow so odds for a pop and into Wednesday.  Nothing guaranteed but that's the most bullish driver right now.  If all the talking heads would stop talking about the coming crash that would probably help too.
SPY-X is currently stopped out of the #1 ranked position VXX and did leave a couple bucks on the table today in opportunity costs but.....keep in mind...this is NOT a daytrading platform so we expect some lag along the path to Alpha, especially when we remember one of our prime directives
....preservation of capital.
Given today's developments it would be helpful to establish a re-entry level for stopped positions and that will be coming in a couple days.  In the meantime we'll assume a tactic of re-entering stopped positions (for tomorrow) if the closing price of the #1 ranked slot is at least 1% greater than the the calculated stop on the worksheet. Huh?   Yeah, it's confusing I know so I'll add another metrics line to the stops to clarify ...soon.

Saturday, September 27, 2014

Yo-Yo Markets....9.27.14

A lot of volatility recently...there's an understatement....kind of reminds me of the good old days of late 08-09 when the Dow could move 200-400 points a day up and down for weeks on end.
In times like this I generally prefer to stand aside and avoid the whipsaws but the new SPY-X model has helped to clarify the odds and eke at least a few points out of this see-saw and AS LONG AS WE PAY ATTENTION TO OUR STOPS the risk is fairly contained.  In Friday's action the VXX stop fired at 30.02 (see below) and we closed the position for only a .3% loss...much better than hanging with it until the end of the day (MM stands for "Money Management").  There's always the potential that the markets will open way up or way down and blow through our stops but those are typically driven by big news days and the markets have recently shown little tendency for big opens or big downs that reverse ....a radical change in open to close behavior from the 09-2012 period when fading opening gaps, either up or down, was a high probability strategy.

Thursday, September 25, 2014

Trap Door Opens...9.25.14

Yesterday's potential Key Reversal turned into a Trap Door setup right at the open and got progressively worse as the day wore on.
The SPY/SH Vixen chart below looks like a JAWS caricature...it was just as scary if you had long positions. The SPY TrendX chart on the right suggests there's likely more bad action to come.
Our suspicions about M3's failure to go long after yesterday's surge turned out in M3's .favor and we avoided a substantial drawdown by sticking with a cash position going into today.
The work on the SPY Pulse model continues...here's the latest below...now termed SPY-X.  Refinements continue before deploying actual $ but the preliminary results are more than encouraging.

Wednesday, September 24, 2014

Key Reversal Day?...9.24.14

The day started out a bit iffy but turned solidly positive midday with virtually all sectors joining in by end of day. We've still got some work to get back to the old highs and we need to see a continuous day tomorrow for reversal confirmation.
I've modified the SPY style box a little and turned on the auto-stop feature.  There are 6 active inputs described in the "Beta" line.  The fact that the Box only displays 3 results indicates the other 3 inputs do not meet the minimum momentum requirements to fire.  The Box is really an old M6 model that's been speeded up considerably and tweaked a bit to cull the momentum laggards.
Eventually I intend to make it a fully functional long-short model but for none its just a forward looking SPY signal.

Tuesday, September 23, 2014

New Feature...SPY StyleBox.....9.23.14

Markets had another red day with little news to drive momentum.  QQQ was actually green at the M3 pre-close update at 12:45 but ultimately closed in the red.  Worse than yesterday 28 of the Dow30 finished in the red.  The 2 green stocks finished up 2 and 4 cents....not exactly inspiring.
The few intraday upswings were met with concerted selling and M3 is still happily in cash.
I've added a new feature (below)
in anticipation of a rocky 4th quarter.  It still only trades long but thanks to the growing opularity of SPY inverse related ETFs and ETNs we can now effectively play the short side of the markets by being long an inverse issue.  The 6 SPY related issues are reaally a beta spectrum from wild exuberance with the SPY to abject rejection.  I'll be posting a few nuances of the StyleBox over the next couple weeks and intend to make it a permanent part of the M3 site.

Monday, September 22, 2014

Green Turns Red....9.22.14

It was an ugly day from the get go and didn't get much better as the session wore on.
M3 issued a special alert Update at 7:10 AM PST this morning showing the abrupt reversal in momentum from Friday'c close. XIV was stopped out at 43.82 based on Friday's posted stop.
The market swoon was supposedly based on China's announcement of slower growth than expected and no intention to apply a stimulus package.
XLE (oil), XRT (retail) and EEM (emerging markets) were particularly hard hit.  
BABA, the new 800 lb gorilla in the room dropped a few points, perhaps based on reports that YHOO and BABA insiders had devested themselves of a few billion $ in shares greater than had been previously reported.
YHOO also dropped almost 5% at one pointed although recovered somewhat at the close.
A divergence in the SPY price TrendX and the SPY pivot TrendX was noted in the pre-close update of M3 so it will be interesting to see if we get a little reaction bounce tomorrow.

Friday, September 19, 2014

OPEX Volatility....9.19.14

BABA finally went public today...., opened up 35% and ultimately closed at 98.89 on huge volume,...... +38% for the day.
Interestingly, Yahoo sold off pretty aggressively throughout the day after booking an $8.3 gain by selling their position at the BABA open.  Sell the news I guess...a  clue to which was the fact that YHOO at the money calls actually opened down.
The markets vacillated between red and green as the session wore on and ultimately SPY closed down a few pennies...same story with XIV.
M3 is still vested and the bullish signals remain in tact...for now.
Note the VEGA chart below....XLE 's momentum appears to be shifting to the downside relative to the rest of the pack..

Thursday, September 18, 2014

Solid Up Day...9.18.14

All the averages moved higher today with SPY hitting a new high and the Qs almost following suit.
M3 did  a great job of catching the turn and is still green for tomorrow.

Wednesday, September 17, 2014

FED Volatility....9.17.14

The markets were all over the place today and it really got frightening at 11 AM PST when the markets dropped precipitously and the option markets literally froze for 10 minutes.  And then, within 20 minutes stability returned and a slow grind up proceeded until 15 minutes before the close when a small pullback kicked in.
For those that monitor M3 I posted a new bullish signal at 8 this morning, which held throughout the day even though XIV went red before release of the FED minutes.  It looked touch and go for the morning session but at the close we're still holding long.  Many near term options in the major indices have dropped almost 10% in the last 2 days....unusual premium decay to say the least.

Tuesday, September 16, 2014

Signals Improve....9.16.14

We got some enthusiastic buying today, perhaps in anticipation of the FED's meeting although that event has pretty much become a non event when reviewing actions implemented over the past 6 months. XIV enjoyed an almost 5% pop but still closed .25 below our previous stop point of $ 43.71.
While M3's technical signals are turning green the rankings have still not endorsed any positions.

Meanwhile, a closer look at the daily bar XIV chart shows the stagnation in XIV and the threshold that needs to be broken to get to the next level of appreciation.

Monday, September 15, 2014

More of the Same....9.15.14

Markets continue the death of a thousand cuts...except the DOW (DIA) which somehow managed a nice green day.  QQQ took a nasty hit today mostly prompted by the stunning reversal in a couple high profile names.
Then there's this eye opener on Nasdaq weakness that should be considered when mulling likely market direction in the near term.
M3 is in cash for the 5th day.

Sunday, September 14, 2014

Slide Continues...9.14.14

The markets are showing a modest deterioration as the TrendX continues a downward slide. At mid-month there's few apparent catalysts to drive momentum and the news has taken a back burner as a volatility pump.  So far this looks like a "normal" type of correlation and M3 has us in cash until further notice.
VEGA had been essentially flat until Friday's drop (the drama of which can be seen on the SPY VIXEN chart), so the declines are sector wide and not restricted.

Thursday, September 11, 2014

Ponzo Time Machine....9.11.14

Here's the Time Machine's alternate scenarios for the next 25 weeks based on a 50 year lookback at the S&P 500.

Wednesday, September 10, 2014


It was a tenuous recovery day and the markets were marginally higher.  We're seeing a narrow consolidation band forming, which is actually a bit worrisome for the bulls as momentum has stalled at QQQ/100 and SPY/200.
Puts are cheap in this low volatility environment and buying a litle downside protection is always something to consider if the signals get more ominous.
Tomorrow, of course, is the anniversary of 9/11 and there's a heightened sense of anxiety that surrounds that date so we may see a greater than usual range day Thursday.

Tuesday, September 9, 2014

Markets Find a Direction....9.9.14

Early ambivalence was replaced with concerted selling into the close and per the SPY TrendX in the right side panel SPY has now rolled over off resistance and looks to be headed lower.
On M3 the XIV stop was hit early on and the dashboard rankings for tomorrow are ---------.
Even mighty Yahoo pulled back a bit but the Alibaba carrot will likely push this baby to the limits in the next 2 weeks before the IPO actually fires. (Yahoo owns 22% of BABA and will distribute at least 50% of the IPO gains to shareholders)
The cash stops for SPY, UPRO and XIV are above current prices...that's because those are the exercise levels calculated by yesterday's close.  At this point all the stops have been violated.
VEGA (below) illustrates XLE's dramatic plunge relative to the rest of the markets.

Monday, September 8, 2014

Looking for a Direction....9.8.14

A yin-yang day with a rising dollar and falling oil prices.  Volume was thin.
XIV was all over the place as the market tried to get traction, either up or down.
The SPY Vixen chart below illustrates the failed follow through to the downside.
For tomorrow the M3 outlook is neutral although the rankings are flashing a bullish signal.
Keep stops tight to avoid the whipsaws.
M3 updates are free until October 1st as my travel schedule has expanded for late September.

Saturday, September 6, 2014

Back to Parity....9.6.14

Friday's initial hesitation at the less than stellar jobs report was replaced by a positive swing as Obama reported on the NATO stance on the Ukraine and hints were reported that there may be a multi nation coalition forming to deal with ISIS.  News (and emotions) will always trump technical factors and that looks like what happened yesterday.
A bit surprising but XIV came up as a #1 rank on M3 at 8 AM PST and it performed well throughout the day.  We'll be looking to Monday to see if there's follow through on Friday's pop.
September tends to be a statistically volatile month and buying in October for the buy and hold types has been a better bet over the last 15 years.
Nevertheless, for now the markets are still maintaining a positive trend as shown in the daily bar version of VEGA below.

Thursday, September 4, 2014

Reversal Day...9.4.14

The markets started strong but faltered badly in the afternoon session,
The NYAD advance/decline line went from a bullish 1.92 to a bearish .40 in a matter of hours and the money management stops post on the M3 site were hit and those positions closed.
The M3 rankings closed the daily ----------, so we're in cash..
Each day you'll notice a few tweaks to the M3 site as we continue to refine the layout and make it more user friendly.
The M3 site has now been reformatted to show UPRO in lieu of SSO and the daily and 10 minute M3 TrendX charts (below) have been reconfigured also to show UPRO in lieu of SSO.

Wednesday, September 3, 2014

APPLE Stumbles.....9.3.14

Hacking concerns at Apple dropped the stock almost 4.5% and singlehandedly pushed the Qs into the red.
SPY was at another new high temporarily ...200.41...but couldn't hold onto the gains.
The right side SPY TrendX chart appears to be tuning down and today's M3 signal was neutral although UPRO is still ranked #1.
A new  cash stop panle have been added to M3, one of the continuing refinements to the platform prior to formal release.

Tuesday, September 2, 2014

SSO versus UPRO in M3....9.2.14

One of the factors I'm reviewing in M3 is the use of SSO versus UPRO as the mid beta input between SPY and XIV.  UPRO versus SPY is a much more reliable and profitable pair than SSO versus SPY and below are runs of M3 using SSO and UPRO as the SPY leveraged outlier.
SSO is 2X SPY and UPRO is SPY 3X so we'd expect the drawdown factors to be reflected according...which actually is not the case as can be seen below.
In fact, both mid and longer term returns are somewhat enhanced using UPRO in lieu of SSO.

There are a couple caveats to using UPRO instead of SSO and those include UPRO having about 20% of SSO's daily volume and a much thinner open interest and much greater bid/ask spread in the option chain.
On the positive side SSO and UPRO are less than 2% apart in price (120.90 vs. 122.30) and the bid/ask spreads of both SSO and UPRO are .01 and .04 respectively.....not a deal breaker.
Note in the rankings that UPRO assumes #1 ranking on 8/25 and 8/26, which is largely responsible for the improved performance metrics.