Saturday, June 15, 2019

PONZO Forecasts for Gold and Silver....06.15.2019

Following a number of high profile bullish forecasts for gold in the upcoming months I thouhgt it might be instructive to look at the PONZO charts for both gold (GLD) and silver (SLV), since silver tends to follow gold's momentum and can often be used as a confirmation signal, albeit it a lagging one. The mot recent PONZO forecast for gold was dead on so let's see how this one pan's out.
Per PONZO gold looks a bit overbought right now but the long term prospects for both gold and silver look positive.  So.....buy the dip?






Wednesday, May 29, 2019

Delta Neutral Update....05.29.2019

Here's a look at the current QLD/QID delta neutral model.  Note that we've set the trigger threshold up to 2%...reflecting the current pop in volatility.  We've missed a few big move days due to the out of the gate surge limit stops...meaning the model simply didn't trigger on those days.
Nevertheless....capital preservation is our number one goal and in that respect the DN model has performed well and shown admirable performance and safety relative to a straight directional model such as our benchmark VIXEN momentum model shown below.


Monday, May 27, 2019

MoDX charts for QQQ and GLD.....05.27.2019

Here are a couple updates for the MoDX (directional momentum DMI+/ DMI-) charts using QQQ and GLD (gold ETF) for illustration.  GLD is pretty much a train wreck having gone basically nowhere as the talking heads have screamed BUY!!!! over the last year.  QQQ (NAZ100) on the other hand is oversold but as we have (painfully) learned in the past, thing that are oversold can often get even more oversold.
These are 30 day charts since my trading bias is strictly short term.


Wednesday, May 22, 2019

Delta Neutral Update....05.22.2019

With volatility on the uptick we are once again mining some nice gains in the delta neutral QQQ based model using QLD and its inverse QID.  The model produced little return in Aprils due to depressed volatility but since MAY 6th we've seen a sizable bump.  Patience is the name of the game when playing delta neutral along with attention to the rules that demand a quick position exit if intraday reversals trigger...of which we've seen several in May.
Note that our optimized limit stop % has risen to 2.6%.. a massive jump from April when it was riding at a sleepy .8%....an all time low.
Both the Skew and the TrendX charts gave us a clear signal back on May 6th that things were about to change. 

Sunday, April 28, 2019

PONZO Updates for SPY and QQQ....04.28.2019

The new PONZO updates reflect an almost neutral short term outlook for the broader market.  The previous updates almost 6 weeks ago were dead on for PSY and QQQ but wrong for TLT which has shown considerable resilience in the face of the current bullish trend.....which is cautionary.
Best bets now are for some butterfly action although we are still id-earnings season so may be more prudent to wait a couple weeks before going too heavy...or simply scale it.


Thursday, April 25, 2019

Delta Neutral Update 04.25.2019

We haven't posted DN results for a while because we are in one of those extended lull periods where volatility has leveled off and intraday reversals are common.  Those are tough times to trade as we get stopped out of positions on a regular basis as opening gaps up or down get reversed during the course of the day so that the other side of the DN trade gets stopped out and we're left with little gains and often small losses as our trailing stops trigger.  What's interesting right now is that volatility appears to be on the upswing and if that happens with a vengeance then we'll be back in the money making mode.  For now we just play it one day at a time and enjoy the longer term gains.

Saturday, March 23, 2019

Delta Neutral Hits a Home Run....03.23.2019

A great couple days for the delta neutral models QLD/QID  and SCHB/SH.  Friday was as picture perfect a delta neutral day as could be imagined. A slow start out of the gate gradually built momentum throughout the day as we were limit stopped out of QLD and SCHB and then reaped some nice gains in QID and SH into the close as S3 pivot support levels held firm.  So, if we can make the big money with the Qs model why even bother with the S&P based SCHB/SH model?
the answer is that SPY and QQQ do sometimes diverge and the SCHB/SH model is a nice safe jumping off point for traders still trying the understand the delta neutral strategy while still outperforming a SPY based directional trade and with reduced drawdown risk.


Monday, March 11, 2019

Delta Neutral Update ....03.11.2019

A good day for the QLD/QID delta neutral setup.  Markets reversed from Sunday night's red open to a Monday morning blowout for the NAZ.  The DOW was held back by a 13% swoon in Boeing stock but the Qs were the momentum leaders from the open to the close.
Note that the "best odds" value for QLD has fallen to a new multiyear low of 1.1...completely contradicting its beta value of 2.

Saturday, March 2, 2019

PONZO Updates for March....02.02.2019

Here are the PONZO forecasts for SPY, QQQ and TLT...our major focus indices. The outlook has actually changed significantly since our last look with the SPY and QQQ decidedly bullish and TLT decidedly bearish.  Fixed income has been faltering recently and the forecast for TLT suggests that continued weakness is the likely path.
The talking heads are screaming "CASH" with a warning that mid March will see a new opening for the bears.  Actually...nobody knows and the motives of the prognosticators are always suspect since no one ever fesses up when they make a lousy call.  That's why we trade strictly data driven strategies based on volatility and mean reversion triggers.  Recent economic data has been weak with retail suffering major hits but the trickle down effect has not yet set it.  When it does...watch out below.



Monday, February 25, 2019

Delta Neutral Update...4 year returns......02.25.2019

I've edited the performance metrics a bit to reflect 4 year results.  This system works best in periods of volatility as can be seen by the varying slope of the DN equity curve over 4 years.  Low volatility equals flat performance....which can extend for months...but when volatility kicks in we start to mint money with little of the risk exposure that a directionally biased move would create.
The volatility trigger (SET LIMIT STOP)  has been set at 1.9%... a value that can fluctuate significantly depending on the current volatility environment.  During the course of the past couple years we've seen the BEST ODDS LIMIT STOP range from a high of 3.8 to a low of 1.0 ...close to the current level.  If we adjust the SET LIMIT STOP value lower we generate more trade triggers, greater returns BUT a greater risk of reversal drawdowns.......that;s just the tradeoff inherent in using this methodology.  For now we'll stick with 1.9% in anticipation of a volatility pop and a big payday.
Note that back on the Feb 5th post of the DN model trades were triggered 169 out of 250 days (68%) while in a longer lookback of 1000 days trades were triggered only 533 or 50% of the time.

Sunday, February 10, 2019

PONZO Updates for SPY, QQQ and TLT....02.10.2019

Here are the February PONZO forecasts for our index targets...SPY, QQQ and TLT.
Comparing the new forecasts to last month suggest a weakening market in both equities and bonds for the next few months.  This has been somewhat supported by the generally weak tone and forward guidance of recent earnings reports, especially in some of the big tech names.  Industrials are also under pressure while the FED remains the 800 pound gorilla in the bond/treasury market.



Tuesday, February 5, 2019

Delta Neutral S&P model with Schwab inputs....02.05.2019

Here's a way for Schwab users to trade an S&P based DN model and only incur modest commission fees as SCHB (the SPY ETF proxy in Schwab) trades commission free.  Schwab doesn't have an SH proxy (the inverse for SPY) so for now we still have to use the ProShares ETF. 
Performance metrics of this model precisely match those of a SPY/SH pairing so save a few bucks and use this version instead. Max drawdown is extremely low compared to the benchmark.


Sunday, February 3, 2019

Delta Neutral Update for QLD/QID and a dollar/euro pair study

As mentioned previously, the recent decline in volatile as reflected in the ATR and OC spreads has limited our delta neutral equity curve.  We can get back in the game by simply lowering the limit stop per our "best odds" value and, really, the only risk we incur is opportunity costs when the market opens above/below our limit stop and the trades never get triggered.  For now we'll hedge our bets a bit and stick with a slightly elevated limit stop value as compared to the "best odds'.

Also, see below, an update to our classic dollar/euro pair trade using the Z-score analytics.
This is not strictly an either/or trading model...we just look for which side of the trade has the greatest probability of reversing and assume (generally correctly) that the the other side of the pair will react inversely. Pretty good odds on this model with a lookback of 6 months we've had 23 trades, 18 of which have been winners. so a 18/5 win/loss with only minimal drawdown.
Click on chart to enlarge.
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Tuesday, January 29, 2019

A Delta Neutral 20 Year Treasury model...01.29.2019

Looking to increase our toolbox of DN models in order to diversify income possibilities ....here's the TLT versus TBT model.  Keep in mind TBT is leveraged 2x inverse to TLT so the limit stop has to be double TLT and the trailing stop also has to be double TLT's.  The linearity of this model is truly outstanding and the overall max continuous drawdown is also attractive...especially when you consider the equity curve of the benchmark TLT when seen in a buy and hold situation.

Sunday, January 27, 2019

Update for Delta Neutral....01.27.2019

Returns have flattened out on the QLD/QID delta neutral model as volatility has followed a decline.
It's still my go to model in this environment of uncertainty and now earnings season is kicking off so expect some sparks.  Just for comparison I've included the metrics for a 1 beta DN model trading SPY against SH (the ETF SPY inverse).  Again, this mode has a value of 1 beta while the QLD/QID model has a beta value of 2.


Tuesday, January 22, 2019

PONZO Update for TLT and an XLU butterfly....01.22.2019

Here is the last of our PONZO toolkit...TLT...the 20 year Treasury long ETF and another of our favorite butterfly plays.
As mentioned yesterday a possible XLU butterfly debit setup is shown below.  As with most butterfly trades risk is limited and little trade maintenance is required.  This is a 3 week trade with nice odds unless the market really tanks....always a distinct possibility in this volatile environment.


Monday, January 21, 2019

PONZO Updates for XLF and XLU....01.21.2019

Following last week's PONZO forecasts here are the last 2 sector ETFs we will be tracking for a while...XLF (financials) and XLU (utilities).  XLF has been hot for the last week but PONZO suggests a cautious or hedged position near term.  On the other hand XLU looks especially promising for butterfly traders ....a strategy that has been a consistent money maker over the last 2 years.
Tomorrow we'll look at a couple XLU butterfly setups.....credit and debit....using our PONZO generated support /resistance bands.

Thursday, January 17, 2019

PONZO Updates for SLV, GLD and XOM....01.17.2019

Following yesterday's SPY/QQQ forecasts here are the forecasts for silver, gold and oil (via XOM).
A few high profile names came out today with rosy prospects for gold this year and the PONZO chart certainly supports this.  If looking for a safety net GLD looks to be a better bet than SLV (right now) while global economic slowdowns may sustain the current neutral outlook for oil.
Tomorrow ...the financials and utilities via XLU ...my favorite butterfly play.



Wednesday, January 16, 2019

PONZO Updates for SPY and QQQ......01.16.2019

Here are the new Ponzo Updates for SPY and QQQ.  These forecasts have been eerily correct over the past couple years and mostly these are reserved for commercial clients.  Ponzo was one of the very few forecasting models that predicted Amazon's streak from $1000 to 1850 along a defined growth path. 
See PONZO explanatory link in the right side panel.
Tomorrow we'll look at a few other PONZO models that might help shed light on the possible decoupling of the SPY and QQQ over the next few months.


Sunday, January 13, 2019

Delta Neutral Update and Momo vs MR for QLD

The market's been in a bit of a funk last week so we didn't get any trade triggers.  Vol may pick up this week if POTUS goes for the Emergency funding option and Dems go ballistic.  Well see.
As an aside here also are the QLD  performance metrics for our VIXEN TF (volatility momentum) and VIXEN MR (volatility mean reversion) models.  It's more than surprising to me that the metrics aren't all that different....you just have to pick one or the other....or go the safe route and play DN.
Always keep in mind that the VIXEN models are NOT based on price parameters but are based solely on daily volatility analyzed using a toolbox of range algorithms.



Sunday, January 6, 2019

Delta Neutral ALT Limit Stops....01.06.2019

Here's a look at what happens to our performance metrics as we adjust the value of the limit stops.
Our current "Best Odds" indicate a 3.8% value ....which I tend to discount by almost 30% based solely on discretionary gut feelings and the historical long term value of the QLD limit stop of 2.5%.
Without further comment here are the metrics using alternate values of 2.5, 3.0 and 3.5%.
Note how increasing the stop value decreases the number of triggered trades and affects the linearity.



Thursday, January 3, 2019

Delta Neutral Update....01.03.2019

Am ugly day that had a morning reversal potential but the sellers took hold as the day wore on and the overnight session is now also in the red.  No news is good news so we're likely to see more of this type of big range whip action for a while.

Tuesday, January 1, 2019

Delta Neutral Update...01.01.2019

A new year and new possibilities but the same old delta neutral preference.  Things could get rocky this year but we don't care (from a trading standpoint). The surge on the 26th changed the QLD benchmark situation dramatically but one day does not make a portfolio and that's the opportunity cost of a  DN strategy.
Best wishes for all in the coming year...we might need it.