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June
12: Closing Read
Boy
I'm glad this week is over! Five signals! In a two point
range it's hard to make a buck. Interestingly enough however
is the fact that the net return for the trading model for the past
two weeks is zero (+3 last week, -2.97 this week). In a two
point range the fact that it didn't lose...
At the
close, signal weight was -537, the Change +12. The model is
still short having not yet achieved it's target.
NOTE:
Next Friday SPY goes X-Dividend by about 55 cents. We
cannot be in a trade when it goes X because if we're short we have
to pay the amount, if we're long we get it back and then have to
pay a tax on our own money. So regardless, no signal taking
next Wednesday on.
June
12: 2:55pm
Signal
weight moderated to -689, the Change +2.9. If the Change were
-56, a secondary trade could be established for a 50 cent profit.
June
12: 1:30pm
Signal
weight continues very strongly negative at -1157, the Change -31.
The trading model is short SPY at 94.38 with a GTC cover at
93.48.
June
12: 12pm Enter Short Signal confirmed at SPY 94.38
The
short signal has confirmed at 94.38. The trading model is
short SPY at that level with a GTC cover at 93.48.
June
12: 11:30an Exit Long Signal confirmed at 94.49, Early Enter
Short signal issued
The
exit long confirmed at 94.49 and a new early enter short signal
has been issued that will confirm at 12pm if signal weight is less
than +540. This is a pure signal.
June
12: 11am Early Exit Long Signal issued
An early
exit / slope change down signal has been issued that will confirm
at 11:30am if signal weight is -940 or more.
June
12: 10:30am
Early
exit / slope change signal expected at the next bar, 11am.
June
12: 10am
Signal
weight -1635, Slope +145, Change -131. Early exit Early Slope change
signal next bar at this level of signal weight.
June
12: Opening Read
Strongly
negative signal weight of -1362 has the Change -136, the Slope +286.
An Early Exit Long / Slope Change down signal is expected
in 2 bars (Slope/Change=# of bars). And, since the Secondary
is already down, a short signal is also expected today.
June
11: Afterthought
Five
signals and one secondary trade in one week and it's still Thursday
with the potential of another short signal tomorrow. Net signal
point loss of -2.96 and net
21 points on the year following the model. Five trades,
a more volatile week? No, less volatile week according to
the VIX index. If you've been following
the VIX you'll see it's near the pre-Crisis low (class A+ exogenous
event).
June
11: Closing Read
Signal
weight spent most of the day very strongly positive. The middle
short signal from yesterday failed and today's long signal achieved
its goal. I once again managed to avoid a profit by thinking
too much. A trading model is a trading model and one would
think that after 8 years of working with it I'd learn to simply
take every single signal and rely on the 85% success rate the model
has historically achieved. Oh well, human nature I guess.
At the
close, signal weight was +1129 and the Change -13, the signal again
out of confirmation by the Secondary. Tomorrow we can expect
a slope change down unless signal weight is extremely positive.
Until there emerges a trend in signal weight as evidenced
by the Secondary, we'll continue to get this range bound trading
within a very narrow range.
June
11: 2:30pm Long Signal Achieves Profit Target
Signal
weight climbed to +1700 during the 1:30pm bar, SPY making a high
at 96.07 achieving the profit target of 95.97. The trading
model is again neutral. I'm quite amazed this signal worked.
Signal
weight is now +1684, the Change +24.
June
11: 12:30pm
No major
changes from the prior posting. The Change now +28.
The
next posting at 2:30pm
June
11: 12pm
Signal
weight continues to flip around taking the signal in and out of
confirmation of the Secondary (gray dots). At this posting,
signal weight is +1129, the Change +31 and the signal out of confirmation.
June
11: 11:30am
The
current long signal has flipped in and out of confirmation several
times during the last bar as signal weight has ranged between +1056
and +1235. It is important to watch the Change number today.
As soon as it gets near zero, the potential for a quick drop
in price will be very high. The trading model is long SPY
at 95.07 with a GTC exit at 95.97.
What
will break this range bound trendless period? Most likely
some exogenous event!
June
11: 11am ENTER LONG SIGNAL CONFIRMED AT SPY 95.07
The
enter long signal confirmed at SPY 95.07. The model is long
SPY at this level with a GTC exit at 95.97. Signal weight
was barely enough at the bar change to trigger the signal and has
now dropped out of confirmation. I will be surprised if this
signal works.
June
11: 10:45AM
It appears
that the enter long signal will confirm at 11am. These are
less than ideal conditions for successful signals as once again
we have a high level of signal weight needed
to keep the Secondary up, and with any moderation in signal weight
the Secondary will flip back down. The model will take the
signal but this is clearly a higher risk signal as long as these
conditions continue. Obviously signals generated when the
Secondary cannot easily change slope are better than when it can.
June
11: 10:30am DOUBLE SIGNAL: Exit Short Confirmed
at SPY 95.17, Early Enter Long Signal issued.
The
exit short signal confirmed at 10:30am at SPY 95.17 generating a
loss of 1.26 points. An early enter long signal has also been
issued that may confirm at 11am if signal weight is greater than
+1210. The Secondary can easily flip back down today if signal
weight drops below +1210 taking any possible long signal out of
confirmation.
June
11: 10:15am
If signal
weight maintains at +1400, the Delineator will issue a double signal
at 10:30: exit short/early enter long. This will most
likely lock up the program if you have yours set up to send email.
If it locks up, you'll need to hit <ctrl><alt><delete>
on your keyboard to bring up the task manager and shut the program
down, then restart.
June
11: 10am Early Exit Short Signal issued
An Early
Exit Short has been issued that will confirm at 10:30am if signal
weight is greater than +220 . With signal weight now at +1301,
once again flipping the Secondary up, we can also expect an Early
Enter Long signal very shortly. To turn up the Secondary needs
+1210 signal weight. More of the same range trading
action going on here causing multiple signals. With a high
level of signal weight needed to flip the Secondary up, and a possible
long signal again coming near the highs, we need to be careful.
June
11: Opening Read
Positive
signal weight of +926 has the Change +72, the Slope -41. an
early exit short signal is expected next bar at this level of signal
weight.
June
10: Closing Read
The
middle long signal exited at a loss today of $1.48 at 1:30pm as
signal weight spent most of the morning weakly negative. Another
short signal was issued at 3pm at SPY 93.91 with a GTC cover at
93.01. This signal was not a middle signal because at
the time of the slope change the Secondary was down, so a pure signal.
For
the last 8 days, SPY has sat in a very narrow trading range of 93
to 95 because there has been no clear trend in signal weight. However,
if you change your num-bars on your program to 250 and view the
Primary, you can easily see that the trend in signal weight has
generally been down as evidenced by the slope of the Primary from
12:30pm on 6/2 to the present. Look at how many double and
single chevrons there are defining the range. So obviously
until this breaks, we need to be cognizant of where in the range
the signals are hitting.
The
key to breaking out of this trendless range will be some sustainable
level of signal weight that won't exhaust the Change all in one
day. Today's range in signal weight never exceeded +-1000 and spent
most of the day only moderately negative.
June
10: 10:30am
Signal
weight has turned weakly negative at -141 the Change now -34, the
signal back out of confirmation. Signal weight will need to
improve or this middle will turn out pretty much like the last one.
If signal weight turns strongly negative expect a slope change
mid-day and possibly another short signal. Don't watch price,
watch signal weight.
NOTE:
This is the last posting today until after the close. The
email system will be on.
June
10: 10am
Signal
weight has moderated from the opening and now stands at +652, the
Change +1.3.
June
10: Opening Read
At the
opening, positive signal weight of +1245 has the Change +32. The
Secondary is back up and the signal is back in confirmation as it
only takes +525 signal weight to turn the Secondary up. The
trading model is long the middle signal at 94.95 with a GTC exit
at 95.85.
June
9: Closing Read
The
middle short signal ended today at a -$1.13 loss and a new middle
long signal was also issued at SPY 94.95. At the close, signal
weight was +951, under the amount needed to keep the Secondary up
and the signal in confirmation.
We knew
yesterday at the close that the Change number would rise quickly
unless there was extremely strong negative signal weight. Today
our expectation for tomorrow is almost the opposite...needs very
to extremely strongly positive signal weight to keep the Change
positive or else another slope change down tomorrow is likely.
So what's
different here in the last two weeks from the prior month? Seems
like a lot of hacking around on the Secondary resulting in both
long and short signals with varying success. I can point to
two main reasons: 1) low levels of volatility as measured by the
VIX index and 2) no clear trend in signal weight resulting in the
Secondary having a slope near zero resulting in confirming both
long and short signals. This is evidenced by the low value
of the Slope of the Secondary which, during trends, exceed +-80.
We haven't seen that since May 15th.
For
the moment, the trading model is acting like it is trading without
confirmation by the Secondary. On your Trade Window, push
the "trade without secondary" button and re-run the signal
generator. If you copy these out and measure how successful
the model is trading slope changes, you'll see a lower percentage
of successful trades compared to trading with the Secondary. This
is so because trading against the trend generates more risk. Intuitively
we know this to be true and it is borne out empirically.
When
the Secondary's slope doesn't exceed +-80 for more than a day or
so before flipping back over, isn't this a "trendless"
market? It is and hence the Secondary is simply confirming
signals based upon the sign of the curve at the moment. While
we cannot predict when the Secondary will begin to trend again,
our discipline insures that we take the signals and stay focused
on the fact that over the course of a year, the Secondary spends
a lot more time trending in a direction than it does doing what
its doing now generating the 80-85% success rate.
June
9: 3:38pm
Signal
weight back to +1126 and the signal back in confirmation as the
Secondary is fractionally higher. The Change now only +30.
We know that signal weight tomorrow will have to be +1500
or higher to keep the Change positive.
June
9: 3pm
Signal
weight remains strongly positive at +1161, the Change only +39.
UPDATE
3:15: Signal weight has declined to +1080 taking the signal
out of confirmation but leaving the signal still valid until it
either hits the profit target or an exit long signal is issued.
June
9: 2:30pm Enter Long Signal confirmed at SPY 94.95
The
middle long signal has confirmed at SPY 94.95.. (email didn't go
out). Signal weight is +1219, the Change +54. The trading
model is long SPY at 94.95 with a GTC exit at 95.85.
June
9: 2:18pm Early Enter Long Signal Issued
An Early
Enter Long signal has been issued that will confirm at 2:30pm if
signal weight exceeds +1120. If confirmed, this will be another
middle signal under conditions nearly exactly to the last signal.
Users are encouraged to maintain their disciplines whatever
they might be...not taking a signal because the last signal didn't
work is NOT a valid reason to avoid a trade. One difference,
a high level of signal weight is needed on this signal to flip the
Secondary...on the last signal a low value was needed.
Also,
the SCP shown in the email as Very High relates to the value of
the Slope being greater than +80, not whether signal weight will
be greater than +1120 this bar. Since the Slope is already
+197, obviously that's the source of the Very High SCP (signal confirmation
probability).
June
9: 2:17pm
signal
weight very close to +1120
June
9: 1pm Exit Short Signal Confirmed at SPY 94.55
The
middle short signal failed to achieve its profit target and exited
the position at 1pm at SPY 94.55. The position lost $1.13.
So what
can happen next? If signal weight turns more strongly positive
and rises above +1120, an early enter long signal will be issued
that will confirm because the Slope is already above +80. Based
upon the trend of signal weight today, this seems the most likely
scenario.
1:30pm:
Oh...and it will be another middle signal if it does.
June
9: 12:45pm
If users
are still short the middle signal, they should be prepared to exit
the short by canceling their GTC covers prior to 1pm and be ready
to cover at 1pm if signal weight is greater than +150 (which is
very likely). The trading model will cover at the 1pm bar
change as well.
June
9: 12:30pm EARLY EXIT SHORT / EARLY SLOPE CHANGE
SIGNAL ISSUED
An early
exit short signal has been issued that will confirm at 1pm if signal
weight exceeds +150. If signal weight exceeds +1120, it will
be possible to get a long signal today after the exit short confirms.
June
9: 12pm
No great
changes from the last several posts. Early exit signal expected
during the 12:30 bar unless signal weight rises to +1500 this bar.
June
9: 11:30am
Signal
weight still +251, the Change +57 and Slope -113. Possible
early exit/slope change in 2 bars signal weight depending.
June
9: 11am
Signal
weight continues to weaken, now at +168, the Change +62 and Slope
-176...still 2.8 bars away for any early exit signal. Today's
early action is a good example of how to watch and take cue's from
signal weight and not price action. If signal weight were
greater than +1000, this would be an indication that price was going
to continue to rise and the slope change would occur more quickly.
Watching signal weight today thus far has pushed out the timing
of a slope change and exit signal which cannot be inferred from
price action. More pushups if you're nervous.
June
9: 10:30am
Signal
weight has weakened somewhat to +320, the Change +79, the Slope
+235. An early exit/slope change signal is still 3 bars away
as signal weight has weakened. Probably the most difficult
discipline to maintain is holding a position at a loss until the
signal completes. Our impulse is to watch price and react
in some belief that our loss will get much larger unless we bail.
But since we can't really earn or lose that much in any single
signal, we should relax and accept what we're given. There's
always another signal.
Do push
ups if you need to expend some nervous energy.
June
9: 10am
Signal
weight remains modestly positive at +557, the Change +102 and the
Slope -300. The early exit long/early slope change signal
is still 3 bars away at the current level of signal weight. The
trading model is still short the middle signal at 93.42 with an
exit GTC cover at 92.52.
June
9: Opening Read
Positive
signal weight of +719 has the Change +125 and the Slope -391. At
this level of signal weight, an early exit short / early slope change
signal will be issued in 3.1 bars (Slope/Change=# of bars).
June
8: Closing Read
Today's
middle short signal did not yet make its profit target and is still
in place until it either does or there is an exit short signal issued.
Signal weight moderated from -1900 to -1000 within an hour
of the Change nearing zero (see 2:30-3:00 postings) causing the
Change to rise quickly. Once again, watching signal weight
and its affect on the Change and Slope is what users should focus
on, not price. We know that it will take ever increasing amounts
of negative signal weight to keep the Primary declining
otherwise a slope change/exit short signal is to be expected
tomorrow.
June
8: 3:30pm
Signal
weight has moderated substantially and is now -1146, the Change
+36. Watching the Change number is very important because
it identifies those periods of time when the Slope is increasing
and when the Slope has reached its extreme. Once the Slope
is at an extreme.
June
8: 3pm
With
signal weight now at -1769, the Change has turned positive at +5.4.
We can expect a slope change tomorrow back up with any moderation
in signal weight, faster if signal weight turns positive.
June
8: 2:30pm
Signal
weight has stayed very strongly negative since the last posting.
The Change however has declined to single digits at -5.3 and
will turn positive with any moderation in signal weight indicating
that the Slope has reached its maximum negative extreme. The
value of the Primary is now -1769 and is declining by 587 ticks
per bar. The trading model is still short the middle signal
at 93.42 with a GTC cover at 92.52. Also notice that a single
chevron has appeared at the low for the 12:30pm bar.
June
8: 12:30pm
Signal
weight continues extremely negative at -2071, the Change -36, SPY
making new lows for the day. The secondary trade identified
in the 10am and 10:45am post easily achieved a 50+ cent profit trading
back near the lows as described. While any counter trend move
in SPY is expected to resolve back in the direction of the Primary,
the window for more secondary trades from here has closed as the
Change is too small. The window for secondary trades typically
is best when the Change is greater than +- 60 and close in time
to the original trading signal.
I'm
off to the gym, next post at 2:30pm.
June
8: 12pm
Signal
weight continues extremely negative at -1972, the Change now -40.
SPY is again near the lows of the day after testing the opening
levels during the 11am bar. The value of the Primary is +1062
and will cross zero in 1 hour as the Slope is -493.
BTW,
for new readers to the Journal, the darker red color of the Primary
today indicates that signal weight is greater than -1500. It's
a visual key to see stronger levels of signal weight. The
darker green color on the 1st indicates signal weight is greater
than +1500.
June
8: 11am
Signal
weight continues extremely negative at -1875, the Change -56. SPY
has traded back near the opening and should retest the lows of the
day within the next hour. The trading model is short the middle
signal SPY at 93.42 with a GTC cover at 92.52.
June
8: 10:45am
SPY
has traded back near the open at 93.82. Signal weight is -1779
and the Change -62. A secondary entry point is possible in
this area to be traded back near the lows of the day.
June
8: 10:30am
Extremely
negative signal weight continues at -2015, the Change -75. The
trading model is short the middle signal at 93.42 with a GTC cover
at 92.52.
June
8: 10am ENTER SHORT SIGNAL CONFIRMED AT SPY 93.42
The
middle short signal has confirmed at SPY 93.42 . The trading model
is short at 93.42 with a GTC cover at 92.52 (plus 1%). A double
chevron up at 92.79 from June 3rd may provide some support to the
downside. As long as signal weight and the Change remain strongly
negative, any move back near 93.80 during the next hour will provide
a secondary opportunity to trade back near the lows of the day thus
far.
June
8: 9:50am
Signal
weight is extremely negative at -1980, the Change -104. Pretty
obvious that the middle short signal will confirm in 10 minutes.
The trading model will, of course, take the signal.
June
8: Opening Read EARLY ENTER SHORT SIGNAL ISSUED
At the
opening, negative signal weight of -1178 and a Slope of -138 has
generated an early enter short because the Secondary has turned
down needing only -360 to change slope. The signal will confirm
if signal weight is zero or less. Ah...the middle signal quandary
again...read Some Extra Notes below: seems like we have the
ingredients for a good middle signal here if you follow the last
paragraph: "Taking middle's early
in a cycle, when low levels of signal weight are needed to flip
the Secondary, when the Change number is large, when signal weight
supports the move and the nearest chevron is a decent ways away,
all make taking any signal better."
June
8: Some Extra Notes
I've
received many emails regarding Middle Signals, their risks and how
to trade them. The simple answer is, of course, you take each
one in the same manner as a pure signal (because a signal is a signal)
and get what you get. Historically, this yields a 50/50 success
ratio.
Several
users have suggested a number of strategies which include a lower
profit target or lowered number of shares. The basis being
that by coming into a cycle late (aka middle), much of the
inherent profit potential has already been achieved.
From
a risk adjusted point of view, (which is the only dependable way
to measure your return) a different answer emerges. If middle
signals carry a degree of additional risk, then we must be
paid an additional amount more in return for the higher level
of risk. So, for argument sake, if we require a 1% return
to assume the risk of a pure signal, we must require a 1.x % return
when we trade a middle signal. Lowering the profit target
is illogical on a risk adjusted basis; our goal isn't to make less
by accepting more risk.
So we
must then believe that it's only more risky to trade for +1% than
1/2 %, and the risks otherwise are the same.
Too
much thinking? You bet! My brain hurts. The real
answer is you must assess the risks yourself and follow a discipline
that you are comfortable following. Taking middle's early
in a cycle, when low levels of signal weight are needed to flip
the Secondary, when the Change number is large, when signal weight
supports the move and the nearest chevron is a decent ways away,
all make taking any signal better.
June
5: Closing Read
The
up cycle on the Primary that began yesterday ended today at 3pm
at SPY 94.34. Today's opening gap provided the opportunity
for the trading model to achieve its profit target. For the
week, one loser/one winner. Next week will provide more opportunities
probably on both sides as the Secondary will continue to flip around potentially
confirming both long and short signals.
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