Tuesday, February 02, 2010

Rotator and EEM Situation

Market dynamics changed quickly Monday as we avoided an ominous collapse that looked like a good bet on Friday. The TLT position got washed out right from the get go and the interesting development was that slots 3 and 4 on the rotation sort (GLD and the Qs) proved solid money makers.
I now realize that one problem with the Rotation model is that the inverse positions are limited to VXX and TLT and I probably need to pump up the portfolio of short side candidates to balance the bullish side of the list. I'm also going to crank down the time frame from a 3 day to a 2 day bar in order to catch momentum turnarounds a bit sooner.
The current sort is shown above.
As an aside, anyone wishing to dig deeper into the somewhat arcane nuances of the VXX should check out Bill Luby's (sometimes known as Mr. VIX-it) exploration of this complex ETN.

The EEM Situation discussed last week along with the butterfly setup is developing nicely based on the Project Z algorithm. The position is currently on day 3 of a BUY signal and we have 9 days remaining before a fixed bar exit closes the position. A momentum excursion into target resistance levels at 1.8 will also cause the trade to exit. The algorithm currently is displaying a value of 1.00 so I'm expecting this trade to close well before the fixed bar date.

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