Monday, February 16, 2009

Weekly Update + Pivots MR

Above, the daily line charts of my 4 ETF basket overlaid by the VIX and the new moving LR7, which I described a couple weeks ago. I'm particularly interested in those instances where the VIX crosses the ETF price as in most cases this has resulted in a tradable 1 to 2 week price surge in the underlying ETF. This is clearly a longer term tell and. reiterating a tactical approach mentioned last week, the best (safest) strategy is to bide your time, employing the patience of Job, and waiting the signals to set up.

As part of my on-going systems refinement, my plan is to merge this VIX divergence signal with the pivots mean regression (MR) signal discussed below to produce a more robust forecaster of trend and momentum.
The lower chart here is the 4 ETF basket again with my usual 4LRs study. All the LR30s are downslope except the XLE, which continues to display a nice lateral pattern supporting my butterfly 47 position that has worked well for the past 2 months.

Some divergence in the RSI and the 4 LRs on all the ETFs, except the XLFs, which continue to look dismal.
My attitude for the coming week is one of caution . . . HEY!, that's the same one I've had for the past 18 months. With expiration this week and the full impact of the bailout plan yet to be factored into the market, I'm keeping my powder dry and sticking to my stable of daytrades to scalp off a few bucks until the trend signals get a bit more confirmation.

Below is the update of the Qs weekly pivot study that I began last weekend. After last week's decidedly negative results, which followed the Qs mean reversion (MR) chart's signal (bottom chart), I am clearly encouraged to pursue the forecasting possibilities of this signal a lot further. Now this chart just reflects the Qs behavior, so a bit of caution is warranted. Nevertheless, in the market's constant flux of mean reversion and random walk, the arguments favoring a mean reversion bias are increasingly supported by the results of the 2 Dirty Dozen system portfolios I've posted.
The results I've posted so far are based on weekly bars and I've yet to apply the algorithm to daily bars or even shorter time frames. It all takes time . . . a lot of time.
My intent for the short term is to refine a standard deviation signal line that was inspired by some of the truly stellar work by Jeff Pietsch at Market Rewind and combine that with the Qs MR signal line and the VIX/ETF crosses mnetioned above to yield a unique forecasting signal.
This endeavor is still in it's infancy and may ultimately become another Kit Of Parts project with a variety of adaptive plug and play Conditions that reflect short term trend and volatility. For the near term my focus will remain on the Qs as I complete the Qs Dirty Dozen components and update the Qs KOP, which continues to yield impressive (IMHO) returns with minimal drawdown exposure.

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