Trade tariff fears spooked the markets today although the Qs held up very well.
For tomorrow the QLD vixen is flat, the PVOL is long and the SSO vixen is long.
We're sitting on a technical support ledge so tomorrow's action may be crucial.
Turnaround Tuesday? Maybe...but the pivot chart looks awful on both issues. These are hold your nose trades and require close attention. However the TrendX signal on both charts is bullish. BTFD? Zero line crosses are to be respected.
The market's getting a bit long in the tooth (weak) and for Monday the QLD VIXEN is flat while the PVOL and MR (mean regression) models are long. The SSO VIXEN signal is flat. How we run Monday should be a good harbinger of action for the rest of the week.
Both VIXEN equity curves are a bit disappointing while the MR models are outperforming.
Same as yesterday....trend following models are divergent with VIXEN flat and PVOL long while the mean regression model is long. SSO Vixen is in cash. (see yesterday's post re: SSO)
Late breaking news that NOKO now wants to meet for summit talks will likely goose the markets higher..at least into the open tomorrow.
For Thursday the QLD trend following models are long while the mean regression models are in cash. Being a FED day volatility was in evidence (as typical) and the close followed the time worn FED pattern of being in the green (85% last 2 years). Any gains due to short covering today should be evident tomorrow.
We're adding a signal for SSO (ProShares SPY x2 Ultra Bullish ETF) using only the trend following Vixen signal. This now gives us a leveraged view of both the S&P and the Qs.
We have a repeat of yesterday's signals with divergence between the VIXEN and PVOL trend following models. We exited our QLD position today as it crossed from positive to negative, thereby saving us from a modest .3% loss.
The "best bet" limit stop continues to erode...now down to only 1%, having declined .3% in one day...which is unusual given the current negative trend in the pivot.
Current market movers...yield curve, China trade, NOKO denuke.
For Tuesday our trend following models are split Long/cash, while the mean regression model is Long. The mean regression model has produced the highest odds over the pat year even though the net returns have equaled our goto model..the VIXEN.
It's all about the news...........................
Our consensus cash signal for Friday saved us from a closing loss and, on reflection, it's always a wonder when we see these consensus signals using 2 diametrically opposed trading methodologies like trend following and mean regression.
For Monday the trend following models are flat while the mean regression model is long.
All models are flat for Friday. Following our default risk management plan we exited QLD today as it crossed over from green to red mod day, saving us from a 1% loss for the day. Hence our results for today are actually 1% higher.. which trickles up through the time metrics.
Volatility looks to be crossing up through the RSQ trend line in the ATR and OC charts.
Trend following signals are mixed for Thursday while mean regression MR model is long. The TrendX is looking good for trend followers as the "best bet" limit stop" has dropped to 1.3 %, a substantial reduction from the 2.0 levels we saw only 2 weeks ago.
The VIXEN and PVOL TF models are long for Wednesday while the Mr mean regression model is in cash. As in recent instances when we get long signals in both the trend following and mean regression models the result has been a sell off day...such was the case today and a lesson we need to keep in mind when signals sync in the future. We're currently at a make or break technical inflection point...will we see a breakout or a breakdown? Technically, the odds favor the bears and we're seeing a little after hours weakness so positions might be scaled back accordingly.
We're finding it hard to get traction in this non-technically driven market. Our trend following TF models are Long while the mean regression MR models are in cash. Momentum is positive and volatility is fading...which should be bullish Of concern is the descending TrendX Stop Alert.
Keep in mind the PVOL model is actually up 14% more than posted due to our trading rule to never let an early gain become a loss. MR is actually 4.5% higher than posted.
All 3 models are long for Friday...that's unusual for a Friday but as mentioned previously...its all about the news and technicals be damned so (discounting any new bad news) let the good times roll.
TrendX has gone from downslope to flat in one day in all models.
The Mr mean regression model has gone to cash at today's close while the trend following models VIXEN and PVOL TF are long. As a cautionary note... I don't like the TrendX signal in all 3 models..crossing down...which has been a reliable signal in the past of a market pullback. For now volatility continues to erode below the RSQ support line in the volatility charts....another cause for concern.
The Iran deal walkaway was greeted with a yawn and the markets closed essentially flat. For tomorrow our 2 highest linearity models...PVOL and MR...are flat QLD while VIXEN TF is long.
Its a market of news these days now that earnings are largely in the bag and we await a possible Sell in May momentum to carry the markets down once again. Volume has been trickling lower..common during the summer months. The Israelis are bombing Syria again and the talking heads are predicting a major escalation of mid east conflict on the horizon. Still a risky trading environment even as Trump sets up to broker a NOKO deal.
Slow butt steady is the name of the game. Things might get dicey tomorrow as Trump may nix the Iran deal despite international pressure to keep in in place. Kerry probably killed the deal all by himself with his pompous behind the scene actions.
Our 2 highest linearity models ...PVOL TF and Vixen MR... are both Long...which is interesting sice one is based on positive pivot momentum and the other is based on mean reversion.
We missed a nice bounce of Friday but, as always, our focus is risk mitigation and long term capital preservation so we'll just let that one pass. Keep in mind that TF models are actually up 14% more than posted due to our nuance risk rules of never letting an early gain become a loss and trading in the after hours. The MR model continues to show the best linearity and equity curve...for now and is flat QLD for Monday.
All models are flat for Friday. QLD is actually up nearly 1% after hours and we may see a continued surge tomorrow if the crowd believes the China trade wars are a non-issue.
In the meantime we had a teachable moment today as the DOW began its 350 point plunge and we looked to the Qs to provide a relative bulwark of strength.
See below....we use the parabolic indicator as a kind of second sight on all trades. When it turned over early on (30 minutes in)...following decay in the MACD we exited out long QLD position...more than a full point above our limit stop. This looked like a really smart move at the time as the markets eroded away but the afternoon session brought in the buyers with QLD ultimately closing only .2% down.
Still... we avoided getting stopped out at our limit which would have cost us another full 1% loss.
We have identical signals from yesterday...mixed long with VIXEN in cash. MR continues as the winning mode and we did something a little differently today. Since it was a FOMC day we know from previous such events that pop and drop is the general order of business so we closed our long QLD positions immediately after the FOMC release at 11 pm PST. This allowed us to book a quick 1% gain and remain flat for the rest of the day as the markets sold off with QLD ultimately closing down just over 1% and another .24% after hours. We have re entered after hours with a partial position based on the PVOL and MR signals.
A risky trading environment needs to be treated accordingly.
After starting out with the DOw down 350 points the market staged a slow churn towards the positive with the Qs the stars of the day. We didn't get stopped out at our preset limit exit so rode the long position to the close with a nice 2.2% gain. After hours QLD is up another 1 % and we're closing 1/3 of the psoiton to reflect tomorrow' s 2 out of 3 long signal.
The MR (mean reversion) model continues to demonstrate the best linearity and equity curve.
FOMC tomorrow so watch for the fireworks although these days end bullish about 78% of the time.