Project Z Update

For those emailing me wondering what happend to Project Z, this is a preliminary run of the SMH component performance in TradeStation 2000i. Keep in mind that this is not the same as the PDQ Dashboard and that my project goal is development of a rotational model based on daily, multiday and weekly bars. Essentially a timing model, Project Z uses a relational algorithm to forecast momentum and strength. Although the Project Z indicator resembles oscillator behavior displayed by the RSI2, the CCI14 and the %R10, this indicator derives its cycle by analyzing a complex set of market metrics in order to identify those basket components in sync and those breaking out or breaking down.
As with many of my previous projects, things tend to take longer than originally expected and various programming glitches along the way have caused me to fall substantially behind schedule. Those who have dabbled in the world of quantitative analytics appreciate the time that minor problem resolution may require and I've had to postpone my typical afternoon naps to try and catch up. Bottom line. . Project Z is not likely to see completion until at least mid February.
In addition, I'm going off grid for a bit testing day trading opportunities with the Project Z indicator on 30 and 60 minute bars. These aren't typical daytrading bar increments but, following my previously voiced arguments for keeping your equity curve growing . . . trade what works.

In case you missed it, Monday was Bubble Wrap Appreciation Day.

The Qs Situation

Here's an update to my ongoing Project Z research. I've added the BZV and the PP+ pivot related indicators along with the Project Z indicator in an effort to see what kind of signal alignment shows up. Project Z fired a Sell signal 4 days ago when the Z value plunged down to the .8 level before starting a slow reversal ascent. Both the BZV2 and the PP+ are currently bullish with the trade only pennies away from a 1/3 ATR cover.
The performance report for the Qs and Project Z are shown below for my typical 16 month floating analysis lookback window. The Long side trades have clearly done very well, but I'd be lying if I didn't admit disappointment with the lagging performance of the Short side trades. Of course the markets have been in a steady up swing for the past year and trading the short side has been more than a little problematic for most traders, but a lesson to be learned here is the old adage, "don't trade against the trend", or if you must, then have a tight stop in place and follow the trading plan.

MLR Rotator Mods

Short note: The Rotator's choice of EEM on Monday worked out nicely with yesterday's sort producing a similar ranking for today.
The MLR Rotator now has a slightly different look and an adjusted portfolio of components. I've initiated the component changes based on continuing Project Z studies and will eventually merge the output of single stock/ETF Project Z system studies with the MLR ranking in order to evaluate the rotation model using 2 diametrically different timing models.
First, the deletions . . DBA, EFA and DIA. DBA has never fared well as a rotator candidate and DBC effectively covers the commodities market for my study. EFA tracks technically very similar to EEM and I prefer the robustness of EEM. DIA is, in my opinion the toughest of the majors to trade technically. The massive gaming by major prop shops of DIA components makes trading this ETF a challenging proposition and I think there are many other ETFs/stocks that respond to timing models in a more reliable manner. Project Z actually does a great job of timing the DIA (85%+) but I think it's 30 stock base makes it too susceptible to surprises. That's just me.
New components include GE, BAC and EWC. While those selections may seem a bit odd at first glance there's really some method to my madness. GE is like Caesar's wife, all things to all men.
It's a financial stock, it's a tech stock, and it tracks more like an ETF than a single stock. With daily volume that often exceeds the Qs and IWM, GE is a high beta juggernaut that provides some attractive trading opportunites for short-timers like myself. Ditto for BAC which routinely trades 200M shares a day and which tracks very well technically. While it has no tech side like GE, BAC does have a beta 1 point higher than the XLF and for rotation evaluation purposes I believe it will prove useful to see how BAC ranks relative to XLF on the daily rotator update.
EWC . . OK, here's a wild card but, after many, many hours of testing, I've found EWC provides an interesting relational sounding board for both EEM and GLD, and EWC technically tracks very well (92%) on Project Z.
Side note: I've realigned the Rotator columns with % change (yellow) moved closest to the sort value. To further clarify: the "5 Day" column is looking at the stock/ETF's 5 day performance relative to the 5 day SPX.

Project Z Loves TLT

Above, weekly bars of the TLT showing the relative stability of 100 as overhead resistance. I say relative because there were a few months 08-09 when things got a bit hairy and TLT hit 123. Other than that little blip TLT been in a fairly tight trading range of 85-95 since inception in 02.

April and May have seen TLT hold a top ranking in our Rotator model more than 75% of the time, so I thought this might be a good time to check in with Project Z and see what the crystal ball was divining. Z fired off a Long exit 3 days ago based strictly on a fixed bar exit trigger, reinforcing the concept of a timing cycle.

These are the kind of performance metrics that keep me coming back to Project Z. Averaging almost 1 trade a month with a nice balance of longs and shorts the max consecutive losers is 0 to 1. Currently flat, TLT may be in a midst of a short term pullback, or something more substantial. . . only time will tell. Given the neutral to bearish mode of the majors as the market yo-yos, this is probably the safest course of action for the short term.

Project Z and the Qs

This is the Project Z outlook for the Qs as of Wednesday's close. Based on the Project Z parameters the Qs are quickly approaching overbought conditions relative to overall market volatility. We have multiple exit conditions and trailing stops in place to limit risk exposure and retain any gains and I expect the current open position to be liquidated today or Friday. The current trade had a double entry (second entry at yellow dot) and is at a break even point after a 5 day duration on the initial entry while holding a .63 gain on the second entry .

Below, the daily rotation model using a 6 period moving linear regression has now pumped the Qs into slot #1. I've exposed a previously hidden metrics column (in yellow) which shows the % change in price for the day. This is the metric that I use as opposed to absolute price, which really provides no basis for evaluating relative performance. While the Qs lagged yesterday, they made up the difference (and more) today.

GLD Bug

Gold was on a tear Tuesday in various iterations. On the MLR Currency Rotator the GLD ETF and NEM are over 2x as strong as the nearest competitor, the UUP. Keep in mind that GLD has a beta 1/6th of NEM. If we normalize the 2 equities GLD actually kicks out a sort value of 24. A quick look at the charts would tend to sponsor a profoundly overbought view of both GLD and NEM (and most of the other gold stocks), but geo-political issues are driving these nuggets higher every day and we're likely to see more upside before a retracement. (also discussed in the Futures' article mentioned over the past 2 days).
The Project Z GLD signal is currently flat having booked some nice gains (shown below).

Below are the results of a Project Z scan of GLD over the past 16 months. There are a number of impressive metrics here including the max # of consecutive losers on both the long and short sides . . 1. The balance between the longs and shorts is also attractive. Considering that most systems I've looked at recently are (understandably) skewed to the long side, this is a rather refreshing pattern. With an average of almost 90% profitable the Project Z scan looks like it has great potential for tracking the GLD.

Project Z

Today I'm kicking off Project Z . . a deconstruction of the Lazy Man's trading system (retired version), looking at the technical dynamics of each component and considering how other trading systems can complement the simple weekly rotational model to milk a few more dollars from these cash cows while at the same time reining in drawdown.
First, over the next few days we'll look at each of the 4 ETFs . . EEM, DBC, QQQQ and SH through the lens of the VXX , the ETN derivative of the VIX that trades like a stock.
Utilizing the ETF Rewind pairs analysis should help provide a perspective on the relative volatility and technical linearity of each ETF while at the same time detecting the highest probability entries, exits and, perhaps most importantly, holding times.

Today's view is of the EEM and, as with all the current ETF Rewind pair studies, displays pair performance for the past 6 months only. Jeff's made several refinements to the earlier version of the algorithm and its now possible to set separate values for the high and low values of the z score bands and thanks to my constant whining he's added an N day stop that prevents unsuccessful band reversal excursions from progressing very far past the optimized N day value.
In this case that stop is set to 9 days, providing a little breathing room for the reversal but not allowing it to run wild. These 2 little mods improve performance significantly and eliminate all marginal and over extended losing trades.
Over the 6 month test period the system kicked out 7 trades with an average hold time of 7+ days, leaving us with cash about 70% of the time that can be deployed into other momentum candidates.
Note that all the trades are Long A (EEM) and Short B (VXX) and effectively detect positive surges in EEM momentum, which is really what we want to exploit.
Next up . . . my leeettle friend, the Qs.

Mid Week VIXology

Now that the excitement's over for AA and INTC I thought this might be a good time to see how the VIX was doing longer term . . in this case on daily (above) and 65 minute bars (below).
OK .. a little aside here. I keep mentioning the use of 65 minute bars in lieu of 60 minutes (hour) bars because there are 390 minutes in the trading day and 60 doesn't go into 390 very well, while 65 (or 130) fits very nicely. Now, in the process of bringing Project Z to the market in the forthcoming ETF Prophet site, one of my loyal trading buddies tested the SSO/TLT model using both 60 and 65 minute bars. The results are pretty amazing, with the 60 minute model showing a flat equity curve, while the 65 minute version was a true thing of beauty with a continuously upslope equity curve. Now that analysis applied only to the modified z score algorithm that drives Project Z, but let me just suggest that system traders working on hourly bar signals may do themselves a favor and try 65 minute bars for a performance comparison.

And now, the VIX. I've drawn some whimsical support and resistance lines on the daily chart, supporting an otherwise completely non-technical view that the VIX's next move will be UP. The 65 minute chart kind of leans in that direction also although we have to temper any enthusiasm with the realization that the VIX tends to behave oddly during the final days preceding expiration, as was noted in yesterday's post and as is evident in today's action on the 2 minute bars.

We're seeing the rollers turn red as of this post and I'm off to Coronado to visit some friends and play a few holes so I won't be around to see today's closing. I will mention in conjunction with the Tuesday INTC report that I have a deep pockets trader buddy who places one trade religiously every quarter. He shorts INTC afterhours on positive earnings reports and then dumps the stock either at the open or throughout the next day. This simple lay in wait tactic has netted him a substantial nest egg over the years and bears closer scrutiny for those interested. I ran the same game with EK for years with equally high probability results. . . although EK isn't the market force it used to be and now that game is more like chasing water down the drain.

Currency Report

Regular readers know the drill by now on this free e-magazine. Of particular note in this month's issue are the lead article on the global currency situation suggesting gold may actually be the trading vehicle of choice, an echo of my previous post considering gold as a currency. Also a clever analysis of the Asian session (11pm to 7 am GMT) and a tactical ATR approach to skimming some low risk gains. Worth a closer look for currency and FX traders or those considering these unique trading vehicles. Thursday's Rotator looks like it made a liar out of me regarding the NEM, but one day does not a market make. This relates directly to the article in Currency Trader that I mentioned above and I'll not waste space reciting that argument favoring gold. Regarding the UUP, it may be instructive to look at some of the additional metrics. Although UUP has a low to medium trending value, Price as a % of the 30 day high (last column on right....also see blog side panel) has the highest value of any of the Rotator components. Just as a cautionary note, these extreme values typically lead to at least a short term retracement. This is not to say that UUP won't continue to climb, just that there may well be a lower price entry in the near future for those who want to chase it.

Maybe it's helpful to look at the losers as well as the leaders on the Rotator and from this perspective the Euro continues it's deterioration. As long as debt default concerns continue to overshadow that continent FXE remains an unlikely rally candidate while the dollar continues to make headway.

Below is Project Z's position on UUP, currently Long but with the Z value reaching short term potential overhead resistance an exit may be fast approaching. Project Z has an 85% reliability with the UPP with very little drawdown so place your bets accordingly. The fixed bar exit on UUP is ten days, which will actually fire today at the close unless a /13 ATR stop is violated intraday.

Project Z - DBC

This is post #3 of Project Z.
Today we're taking a look at the relative linearity and performance of the DBC/VXX pair as a component of our rotation model.
The DBC is the PowerShares double commodity index and has a current beta of only .66 . . considerably less than the previous rotation model components we've examined.
I could have used the UYM (beta 2.92) the PowerShares ultra basic materials or the XLB (beta 1.25) Spyder sector basic materials to reflect the materials/commodities component of the rotation model, but for illustration purposes we'll just track the DBC.
The XLB has the most robust option chain of the 3, the UYM has the thinnest.
Just as an aside, the UYM works almost as well as the DBC in the Lazy Man model.
One of the consequences of the DBC's low beta is a resultant higher N day value (15) than we've seen before. I've allowed the bands to run 2 more days before initiating the fixed bar stop.
There's still a little problem with the fixed stop algorithm timing as shown by the red highlights and Jeff is currently addressing that issue. We actually had a double entry on the last trade confusing the stop algorithm into thinking there was still time to run. That will be corrected and the trade entered on 12-16 would actually end on 1-6 with a resultant %2 loss in lieu of the -19.66% shown. Another difference between the DBC and the previous ETFs is the balance of long and short trades . . in this case 4 shorts and 5 longs.

Gold Currency

I was intrigued by Frank McGhee's article in FUTURES (mentioned Friday) on viewing gold as a currency so I decided to expand the currency rotator model and run GLD against the Project Z algorithm. The results are encouraging . . to say the least . . and in talks with my compadres today we will probably make a gold trading model part of the larger repertoire on the new site.
At the same time I've created a separate MLR gold rotator featuring the GLD ETF and 11 highest market cap gold stocks. ABX, AU GG, KGC and NEM are the largest market cap gold stocks with ABX at almost 2x NEM's cap.
The GLD ETF understandably has the lowest beta, barely 1/6 to 1/9 of the stocks. This differential is further reflected in the price volatility metric column where GLD ranks lowest. I've got a little EXCEL spreadsheet that normalizes the price volatility/beta and the % change (yellow column values). Hopefully, I'll be able to integrate those results into Telchart or, failing that, simply export the data to an EXCEL charting format.
The odd outcome of Monday was that GLD declined while the majority of the gold stocks rose (GOLD was the exception).
On the Gold Rotator ABX is the leader with GG and EGO close behind.
On the Currency Rotator GLD is in the top slot despite Monday's weakness, reflecting the big gains over the past five days.

Tomorrow we'll take a look at the Project Z results as well as a new PDQ Dashboard for GLD.

The Situation

This post does not have anything to do with that colorful reality show character from the Jersey Shore. It does have something to do with some basic support and resistance daily bar bands. Regular readers know that I'm typically not a long term investor. Two to three weeks is my concept of "long term", with only a few exceptions . . one favorite being butterfly option plays, the details of which I profiled in last year.
So, while scrolling through the components of my Telechart rotation model, I was struck by the current "situation" in XLF and EEM and decided to explore a little further.
As of Wednesday's close both XLF and EEM fired BUY signals through Project Z . . XLF with an 82% probability, EEM with an 88% probability.
Both ETFs share a similar beta (1.47 & 1.60) and both are dead on the bottom of the rotational model (ROT) components with values of -32 and -35. This low weighting in the ROT in no way reflects the potential turnaround possibilities for these 2 ETFs . . it just indicates that positive momentum as measured by the 6 period moving linear regression on 3 day bars has not yet become apparent.
If I rely on the Project Z defined momentum cycles for my entry, then I know my target exit is 8 to 12 days away, if not sooner. Tomorrow I'll take a closer look at the possibilities for a low risk spin off trade based on the "situation".

VXX Tracking the VIX

This is a followup to yesterday's argument for using the VXX to track the VIX. First of all, a couple caveats: the inverse of this study doesn't deliver comparable results. That is, the VXX works well to forecast the VIX but the VIX doesn't work nearly as well to track the VXX. . . at least for the purposes of this study, which uses my Project Z algorithm to determine pressure points which translate into entry and exit signals. This development is somewhat frustrating since my ultimate goal was the refinement of a Project Z settings that could be used to forecast the VXX, which trades like a stock as opposed to the VIX, which can only be traded via options, which are subject to their own decay and volatility issues.
This brings up caveat #2. The performance results of this study should only be considered in reference to the number of successful/winning trades. Since the VIX is a statistic and not a tradeable entity, there's a few monkey wrenches that have to sorted out here. The dynamics and pitfalls of entering these signals as VIX options trades are well beyond the scope of this post and each trader has to assess his/her risk exposure comfort level which, in turn, will determine how these signals are translated into trades.
Side note: the yellow dots along the price chart are pivot high/pivot low signals generated by the TS default PH/PL algorithm set to 4/2. I use the signals as a second set of eyes to confirm entries and guard exits.
I view this current study essentially as a jumping off point for further research but it's encouraging to find this initial foray into VIX/VXX alignment so consistent.

Moving On

One of my favorite nuggets in Dr. Brett's poke was the observation that . ."If you're the smartest one in your group then you're in the wrong group." This is a wingtip corollary of "Two heads are better than one" and over the course of the past three years of this blog I've had the immense good fortune to meet and interact with a number of exceptionally talented traders who have stimulated a variety of topics for my research and helped to enrich my grubstake. Many of these traders I've never met face to face and yet, through weekly or daily communications, I consider a few of them among my best and most trusted friends. So . . I'm thinking maybe it's time to build some trader synergy.

For those of you not in the trenches the fact is that being a full-time retail trader focused on daytrading is actually a fairly lonely and isolated livelihood. While there are chat rooms, trader support groups, meetups and expos to provide venues for limited trader interaction, I believe most experienced traders would agree that daytrading requires a unique level of concentration and attention in order to remain consistently profitable. Active swing trading shares the same requirements . . buying the dips, selling the peaks . . and swing traders will always book more gains trading intraday than end-of day. Last Thursday was testimony to that fact.

"Expect success but prepare for the worst" spoketh the Donald and readers who've followed me for a while know that I'm much more concerned about NOT losing money than making money. Capital preservation is Job#1 in my book and is at the core of my bucket list . . that's my bias and it's been pretty transparent in my posts.

At the same time I feel that I keep repeating myself in the course of these posts. . and the blog is getting stale. Really . . if you can't figure out the VIXEN trade after reading a couple dozen of the over 60 VIXEN related posts then you should probably not be a technical trader. The trading setups I use every day are now well documented in the archives and while I may have done a better job sorting them all into neat categories, my goal was always to get readers to conduct their own research and develop their own indicators and systems to fit their trading style and risk management comfort level.

More than anything else, the blog has been a journal of my market investigations and exploration . . . always looking for those nuggets . . . and I've found quite a few along the trail.

But now it's time to move on to something a little different. Over the course of the next month I will be joining forces with several other bloggers and traders to create a practical strategy and solution based site that will focus on trading ETFs using a number of diverse approaches.

I originally lobbied for the site to be called "BZB and More", but that was summarily rejected by my "partners" so we've come up with something a little bit more . . communal.

While there are already other aggregated trader sites, I hope this one will prove to be a little different, speaking with a cohesive perspective and exploring a variety of markets to mitigate risk. At the same time we hope to provide an extended portal for trader resources and offer a spectrum of viewpoints on various trade setups . . sort of like Siskel and Ebert for traders.

When I first started this blog I was specific that one of my long term goals was to develop a basket of systems to trade a basket of stocks/ETF. The new site will provide an operational outlet for that goal, which is shared by the other site participants. Project Z and the PDQ Dashboard were direct products of that goal.

My focus will remain on Project Z and VIX related trading tactics while other members of the site community will focus on ETF rotation models, the SPX, pairs trading and perhaps, in a new departure, Forex . . plus a few wild cards.

Over the course of the next few weeks I'll be providing additional details about our new endeavor, which we hope will prove to be both educational and profitable for our readers.

Project Z - Qs

This is the second post in the Project Z series.
Today we look at the QQQQ component of our Lazy Man trading model using the VXX lens.
Once again we're looking at a divergent pair and in response to a comment by Gary on yesterday's post, keep in mind that I'm really not interested in taking both sides of this trade . . I'm just using the VXX to gauge the relative volatility and linearity of the rotation model components.
Just as a point of reference the current beta of the Qs is 1.1o, while the beta of the EEM tested yesterday is 1.47.

It is therefore a little bit surprising that both EEM and the Qs optimize with an N day value of 7 and the Qs generate one more trade than the EEM during the 6 month backtest period.
Both the Qs and EEM have eerily similar equity curves and linearity values. The Qs produce 16% more P&L gain and this may be traced to my tightening of the N day stop to 7, while I let the EEM ride out to 9 days. The Qs have a habit of acting a bit more squirrelly than the EEM so I'm inclined to rein it in as much as possible. One result of this short stop is that whereas the EEM pair generated all long EEM signals, the Qs variation produces 6 longs and 2 shorts.
After we examine the metrics of all 4 components we'll check the alignment of the signal dates to see how much deviation from SPY momentum can be detected. This is the process I term "basket weaving" and was explored previously with the FXY PDQ model.
Tomorrow we'll look at the DBC.

A Glimmer of Hope

A little glimmer of hope in the oil sector yesterday but, as expected, BP did not participate. RIG also got hit as offshore exploration looks like a threatened species, although it recovered from an almost 10% decline by the end of the day and APC, as one of BP partners, is also in the doldrums. A bit surprising perhaps DVN is looking almost bullish. Almost but not quite. What DVN does have going for it is a LR30 channel that is the nearest to level of the bunch.
However, just a quick look at XLE, XTO and XOM shows an almost identical technical pattern with DVN other than the LR30 channel . . . they're all looking like the next move is down.

After confusing some of my readers by adding NEM and GLD to the currency Rotator, I'm now adding XLE also. In reality, oil is the commodity that drives much of the global economy and while gold may be a tangible hedge, the supply and access to oil is still an important variable in the defining the stability of world currencies.

A little aside here . . . Back about 2o years ago when I was project manager for a $400 million project in Indonesia none of the international contractors working the job wanted to get paid in local currency because the political climate there was so volatile as was the value of the rupiah. Instead, contracts were paid in oil. . . tankers of which were dispatched to various US and foreign ports as payment.
OK, I could bore you to tears with the rest of the ill-fated tale of the Indonesian World Trade Center, but I won't. Instead, we'll just note the little pullback in the dollar that Project Z saw coming. While this certainty doesn't qualify for "reversal" status, a continued short term pull back may provide a lower risk opportunity for chasing the dollar further. And, while GLD also hit a little speedbump, NEM was on a tear as it looks poised to revisit it's mid-May high . . a feat GLD has already achieved.

Hedge Fund Favs - Part 3

This is a sort of the GS hedge funds' favorite 50 stocks lists profiling the repeaters. Above, I've culled out the SER A and B rated stocks while below is the complete list. As far as dividend plays go JNJ, PFE and MRK are the most attractive, with WMT providing a somewhat lesser return. Only four of the group garner A ratings: APC, JPM, TMO, and WFC, but keep in mind these are fundamentally based ratings, not linear correlation ratings, which is what I'm concerned about.
The AB sort of 18 stocks reflects a wide spectrum of sectors: financial, health, tech, oil, manufacturing and retail.
My next project (as times allows) is to compare both the short and long term returns of a pairs model that plays HFT(hedge fund top)18 against the Dow30.
The other intriguing possibility is to trade the group as a basket using the Project Z algorithm. The problem with both of these situations is that they would be very capital intensive and incur a boatload of commission costs using my old reliable Schwab platform and commission schedule. The solution is easy: I just need to convince I-Shares or Schwab or ? to create a new ETF using these 18 stocks and then to periodically adjust the ETF components to reflect the latest GS report.

BAC-up Time?

With the NYAD back down to .12 today things definitely looked dicey for the first couple hours. Yesterday's close was a bit scary as volume collapsed into the close and prices essentially froze. I say scary because those are the conditions that often signal an ugly end of day plunge. Instead we had a little rally at the open today AND THEN plunged . . a delayed gratification for short sellers . . a slow agony for the longs.
Days like today can be instructive if you keep track of what stocks/ETFs make the first break when the NYAD finally turns positive. BAC and SMH are a couple of nuggets that I've been tracking for a while and so far today they've both demonstrated some gusto.
The chart above is my spin on support/resistance lines as well as a 50% trendline that seems to be a historical turning point.
Below is Project Z's take on BAC with a 78% reliability over the past 16 months. Not exactly a barn burner, but that's 78% long and shorts with only 1 consecutive loser on both sides so, for me, that's a keeper. This is the signal as of 10AM PST today.
The linear regression lines are still convincingly bearish so I'm actually standing back on this one until I get some more confirmation of the NYAD slope really turning positive.
Meanwhile, GE, after a early slide, is back in the green and, as I mentioned yesterday . . that's good.

DBC Doldrums & XLE: The Oily Hope

Today's closing stats on the Rotator don't begin to do justice to the wild ride it took to end up here. With the NYAD plummeting out of the gate to a distinctly bearish .13 it looked like another day with blood in the streets, but then a slow grind up began and although it stumbled a few times along the way, all the majors ended up in the green. GLD was clearly stronger than NEM today (bit of an odd situation) and for a while TLT was the standout leader (again). The real star was probably SMH which took a bullish lead early on in the session and closed at the high of the day.
The hands down loser, as has been the case for a number of days, was DBC as global worries have significantly impacted commodity prices, especially metals which suffered a recent double whammy as a result of new hefty mining tax regulations in Australia and elsewhere.

Every night I routinely run through the actual charts of the Rotator components just to see if I agree with MLR 6 sort criteria ranking. Many times I don't and although I'm nearly a genius it usually turns out the next day that the software was correct and my feeble old brain was wrong . . which is why I keep looking at the Rotator.
Nevertheless, I'm a true glutton for punishment and the chart that caught my attention today was the XLE, which sure looks to be chattering against a clear lower support line. We made good money for the past 6 months playing a 57 butterfly but that position was exited a week ago . . dead on 57 and we are currently flat XLE.

My sidekick, Project Z, (shown below) was the impetus for my exit and is currently flat awaiting the next entry signal which should be a BUY unless oil really gets hammered in the next few days. Failing that, I'm of the mind that XLE will head back up to and through the 57 level . . at which time I may consider another butterfly.

Monday VIXology

Above is this week's update to our rotation model. Performance metrics are skewed in favor of linear regression values and in this ranking was produced by comparing the 6 week moving linear regression line channel.

Just for comparison sake I've shown the daily bars (above) and weekly bars (below) for a few select ETFs. The big news, hands down, was the 55% pop in the VIX last week, accompanied by a sudden appearance of volume, which helped cascade the majors through the lower LR30 lower bands. For the week: IWM down 4.5%, Qs down 4.8% and SPY down 5%.
This is the first major violation of the weekly LR30 band since the late 08 recovery began and we are now faced with the possibility of a "kiss the channel good-bye" scenario and a variety of yet to be defined support levels.
Previous uber enthusiastic surges in the VIX have exhibited a 3 day span and then displayed a 10-15% pullback and that's that's probably worth a small side bet. Other than that, I'm on the sidelines, busy refining Project Z parameters and deconstructing the PDQ Dashboard to fathom why it exited the long VXX position on Wednesday's close and left a lot of money on the table.