VIXEN complement PVOL model....02.27.18

Last day of the month tomorrow...typically bullish but the wild swings today have shaved the odds considerably.  I've revised the old pivot model to integrate a volatility component and term it the PVOL model.  It clearly generates a somewhat different set of vesting signal than the VIXEN but the results are offer good risk. reward odds.  Keep in mind that both models are set to mean reversion mode rather than trend following since our underlying premise is the volatility trades tends to be much more reliable when using a mean reverting rather than trend following strategy.

VIXEN looks at QLD, AMAT and AMD....02.26.18

As we continue to examine trading ideas here's how VIXEN trades QLD (QQQ ultra x2), AMAT and AMD.  Why AMAT and AMD?  Because I regular trade them in a stock portfolio and more importantly, because they tend to deliver the goods using the VIXEN algorithms as well as the traditional price based momentum./ mean reversion trackers.
Here then are the trend following (TF) and mean reversion (MR) VIXEN studies with a one year lookback.  As opposed to the VIX we can easily trade these in the after hours as all have robust volume and narrow spreads to limit slippage.

 

VIX flat for Monday........02.25.18

The VIXEN and MOZ signals for Monday are flat.
Later in the week we'll look at the VIXEN studies of QLD (QQQ ultra bullish ETF) and a bigger look at TBT (TLT inverse ultra).....both with attractive risk/reward profiles.  As I explore the trading possibilities using an algorithm based on volatility rather than price I'm surprised to find some issues have a great response while others, very similar in sector, have less than attractive profiles.
So far our little VIXEN portfolio is comprised of VIX, QLD, EWZ, TBT and a couple high profile stocks yet to be fully vetted. Thus we look at a trading spectrum of pure volatility, sectors, countries and bonds....just to diversify our focus at profit opportunities.

VIX 50% long for Friday.....02.22.18

This is kinda weird.   The MOZ and VIXEN signals were posted yesterday 5 minutes before the close based on 12:54 PST data.  Looking at today's signals we see that at the close (6 minutes later) the VIX changed significantly enough that both signals were reversed.  Surprising?  To be sure.
For tomorrow we are 50% long the VIX as today's early 300 point wide scale rally fizzled all day long and into the close..  This was not a follow through day.
Note to self:    do not trade the VIX on FED days.

VIX 50% Long for Thursday....02.21.18

That was a wild ride today....up 250 then down 100. 
For tomorrow the MOZ is now long the VIX while the VIXEN is flat.
Keep in mind the mZ has a time stop only so prudent traders should add a $ stop limit just to be safe.

VIX LOng for Wednesday.....02.20.18

We squeaked through a tiny gain at the close after a wild see-saw intraday.  For tomorrow the VIXEN is long the VIX while the MOZ remains in a non-committed position = out.  As a result our net signal is still 50% long the VIX....however you decide to play it.

VIX 50% Long for Tuesday....02.16.18

For the first time in almost 10 days we have a long signal on the VIXEN while the MOZ z=score based signal looks just about to turn long....note the vertical yeloow dotted line in the ROC (rate of change) chart. The MOZ signal has only fired 13 times in the last 6 months....but its been correct 100% of the time....which is why we like to have its confirmation before going all in on the signal.
Keep in mind VIXEN has a built in $ limit stop while MOZ is strictly a time stop of 10 days.

VIX flat for Friday but TBT looks interesting....02.15.18

Continuing our quest for a small tradable portfolio using the MOZ and VIXEN volatility platforms here's a loom at TBT, the TLT ultra short (x2) ETF.  We've had good results with the TLT butterfly but with bonds in a breakdown condition the TBT is a relatively low risk instrument we can use to pick up a few bucks.  The MOZ signal success rate is pretty impressive (23 wins and 3 losses over the past 6 months) and the current signal is long with a 10 day time stop.  A nice topography chart.
Note that the 10 day stop expired today so we should be flat this position at today's close.
We'll add the VIXEN component signal for TBT over the weekend.

VIX flat for Thursday.....02.14.18

I was on the road today so posting is late but we are still flat the VIX going into Thursday as the markets appear to be on a positive run. We've still got a ways to go to get back to the old highs but for now the signals are cautiously bullish....until the next trap door opens.
Note the lower volatility charts (ATR and PCL) are clearly in an upslope......this is why caution is warranted.

 

VIXEN and QQQ...02.13.18

Continuing with our exploration of trading opportunities using the VIXEN platform, which uses only volatility metrics and not price to generate trading signals, here's a first run on QQQ, the NAZ 100 ETF, one of the most technically reliable indices available...featuring robust daily volume, narrow bid/ask spreads and a rich option chain with 1-2 penny spreads (typically).
Still working on the MOZ companion trades but the risk.reward looks attractive at first glance...certainly much better than buy and hold..

VIX Signal is flat ....here are current EWZ (Brazil ETF) signals.....02.12.18

The VIXEN and MOZ signals are flat for VIX as of today's close ....but while we're waiting for some clarity on the markets here's a look at EWZ (Brazil ETF) using our new toolbox.
EWZ has had substantial momentum lately, has great daily volume and a very robust option chain with relatively narrow spreads....so its an attractive trading candidate as long as we can get a grip on its technical behavior.
The VIXEN gives us a nice linearity profile and although the win/loss ration isn't as good as the VIX it still pays off with a much, much nicer max drawdown than the buy and hold strategy.
MOZ also generates 14 out of 18 winning trades in the past 6 months with no price stops but with a 10 day time stop in place.
We spend a lot of time waiting around for signals...only 88 out of 252 days but we sure keep the risk down and still generate a nice return.

Introducing the MOZ VIX signal....02.11.18

In an ongoing effort to generate a daily VIX signal using differential parameters I have modified the pairs trading model to focus on a single issue using a variation of the standard z-score statistical algorithms. This is an update of the old z-scored based Z model from a couple years ago that we used  to signal index ETF directional moves with a fair degree of success.
Once again...the MOZ signal forecaster only looks back 6 months but, as can be seen below, the success rate is 100%...although only 13 signals were generated.  The MOZ signal will now become the companion signal to the mean reversion VIX signal posted last Wednesday..VIXEN MR.which is based strictly on volatility behavior using the confines of the ATR, open to close and previous close to current low metrics.  There are NO stops, limit or fixed, defined within these VIX models since we are only generating a directional signals of a statistical derivative.
Current MOZ and VIXEN MR signals shown below.

VIX / VXX Pair Trade....Companion to VIXEN....02.08.18

This is a companion trade to the VIXEN signal to be used as a complement/confirmation.  Note that this trade position report covers only the last 6 months and...as discussed yesterday... we are trading the VIX statistical index against a dollar denominated ETN (VXX) so what we are really offering is a directional signal that has to be stratagized according to each trader's unique risk plan.
The directional signal success rate is 9 out of 12 for our current lookback
Like the VIXEN post yesterday in future posts we'll look at ways to further refine and confirm the directional signal of the day.

Introducing the VIXEN...02.07.18

With the demise of XIV and the intrinsic decay characteristics of the VXX ETN here is the new version of the VIX trader.  This model has been under wraps for the past 6 months but now seems like an appropriate time to turn it loose and see how it runs. A few things to keep in mind here.....the model only signals when the VIX value is about to increase short term.  A --- signal does not mean short the VIX...it means take no action.
The metrics DO NOT describe the potential gains/losses from the trades, but rather the total percentage gains of the VIX index of the defined time frames.  Well, you say, what good is that?  Well, it reflects the relative success of the model in predicting the VIX's direction...which is in turn reflected in the timeframe metrics which show positions vested only 72 out of the last 252 trading days...but, what should get your attention is that of those 72 days 62 were correct and only 8 were wrong, with 2 net no change days. 
Since this is an index the only way to trade these signals is with VIX futures or options.  Exactly what options and option strategy  you employ to trade this directional signal is completely up to you and will essentially define your risk tolerance.....
We'll look at some of the nuances in this volatility model in the coming days as well as some of the easiest ways to profit from its signal.

The Death of XIV...Our New Focus....02.06.18

Our flat signal on XIV for Tuesday was a game changer as XIV dropped 92% overnight, was halted twice upon resumption today and will be delisted and terminated on Feb 20th.   XIV longs got obliterated, one hedge fund down 65% and others in a similar pickle, and many, many other stories of complete balance sheet collapse.  Unexpected to be sure but the ETNs are a fickle bunch and have to be traded accordingly. XIV is down $ 1.20 after hours with little hope of any recovery of merit.
We are done with it after a nice risk adjusted run of several years. 

For now we'll focus on SSO, the ProShares SPY X2 Ultra.
We don't get neat the kick of XIV but again our focus is all about risk management.
Below are the current trend following and mean reversion model metrics. 
Note that both signals are flat...an unusual situation. The mean reversion mode has a much better paradigm and TrendX chart (above the zero line)

SPY Blows Thru 269....02.05.18

DOW closed down 1100+ and SPY at 264...In after hours SPY is down to 261 while VXX is up another 2.  I warned about the Trap Door and that's exactly what happened....and it was a BIG door.
Early rally buyers got slammed hard into the close as each buying cycle was met with selling on rising volume.  The close was not bullish and we would expect selling to carry over into the morning session, especially given after hours action.
Our decision to favor the mean reversion model in lieu of the trend following mode turned out to be timely and saved us a few bucks of dangerous exposure as stops would have been violated at the open and no safety net.   Going forward we will favor the model with positive readings above the TrendX and Paradigm zero lines.. 

Picking the Right Paradigm....02.4.18

Hindsight, of course, is a great teacher and hopefully we learn from our mistakes.   Case in point is our little friend the XIV, inverse volatility index, lately decoupled from its SPY momentum derivatives.   We've been following the trend following model MTF7 recently but it turns out, from a risk management perspective, we should have been following the mean reversion model MMR8.
Both models are based on the same ATR parameters coupled with volatility momentum...in the first case we look for ATR stability, in the later we look for ATR volatility.  The results for the past year as of Friday's close are posted below.  Going forward as a general rule we will maintain a composite P/L as we rotate from one paradigm to the other depending on the strength/weakness of the paradigm Alert at the zero line on the chart, which we should have been keeping a closer eye on for the past 2 weeks.  If we had, our P/L would mirror the MMR8 results much more closely.
As of 4:45 PM PST Sunday Dow futures are down 200 points, mirroring my expectations for a hard sell down at the open as a follow through to Friday's close. Our SPY line is the sand is 269...lower than that and it could get really ugly.  Our short strategery is to get long at that level or before if momentum is clearly positive.....all the while being wary of a possible Trap Door opening.

XIV long for Friday...BUT.....2.01.18

First day of February and hope springs eternal as AMAZON blows the door off and GOOGL falters.
VXX got crushed today and if I'd stayed in my position from yesterday I would have booked another $1500, but I got nervous and bailed prematurely.  Lesson learned.  With the MEMO supposedly out tomorrow we may see some fireworks and if Schumer follows through with his threats to shut down the govt. on the 8th we may be looking for an opportunity to go long vol.
For Friday XIV is long, a signal I'm suspicious of ,but AMZN's uber earnings mojo may be the catalyst to make it happen.