GE PDQ Dashboard

Readers who have followed me for a while know that the Qs and GE make up a major portion of my portfolio. I trade each using a variety of strategies including the VIXEN and NYAD crosses for daytrading, premium decay on longer term positions using a number of option setups.
As part of my ongoing research into non-correlated ways to mine a few more bucks out of GE I've added a GE dashboard to my expanding repertoire of PDQs, with the eventual goal of having a robust PDQ Dirty Dozen.
The PDQ above reflects the current state of that research. As with many other of the PDQs, this GE version is a mix of stocks and ETFs and I can make a pretty good case for the logic behind each of the pair components. They all share a high linearity correlation with GE and, although a wide range of N days and trade frequency is evident, I was actually looking for this type of robustness given GE's relative volatility.
Current signals are moderately short.
Volume was running about 35% sub par Wednesday and Thursday, which typically causes short term volatility to rise, and that caveat has be factored into the current signals.
Next week we'll look at a graphical interface for the PDQ that dramatically displays the robustness of these forecasting models.

My New Dollar Basket

This is an update of my previous dollar basket post. The UUP is, of course, the Powershares double US dollar (bullish) and this time around the focus is on other currencies and short term bonds (SHY) as the wild card.

The PDQ Dashboard has gone through quite a few refinements since the initial post and this basket should be considered an alternate to those earlier PDQ components.

The relative beta of the CYB (yuan) is obviously out of sync with the rest of the basket so this signal bears a closer look.

Also out of sync is the relative SHY (short term bonds) beta.

Both CYB and SHY display consistently high linearity and an identical 19% P&L over the past 6 months, and both have a similar trade frequency. And, as in the case of the FXY basket weaving post, in both cases an examination of the actual returns for each side of the pair trade reveals that UUP is the side to trade (the CYB and SHY trades only generate 1% and 2% of the 19% return respectively. For the above reasons I regard these beta skewed pair partners as valuable forecasters of UUP momentum.

The UUP fired a number of long signals on Monday's close and I'll be keep a close watch for exit signals. Since virtually all the PDQ components have 5-7 N day values (Z-score band cycle side to side) I would expect reversals sometime in the next 3-4 days.

Here's a peek at the current UUP call option string. Virtually all open interest is at the ATM 23 calls and despite $.15 net gain in UUP the 23s fell a nickel. A lot of interest here and the early action today was focused on buying the Ask.

Dynamic Ticker

As a follow-up to yesterday post here's the Schwab dynamic ticker in action. Also shown on the left is one of the 4 setup menus. The set up menu time frame indicates 1 minute, but the ticker ebbs and flows on a tick by tick basis and as a result any turns in market momentum are immediately obvious.
You can set up a number of watch lists for the ticker to monitor or, if you've got spare screen space, you can set up several of these tickers to run concurrently.
Some traders are data stream oriented but my brain is hard-wired to work off pattern recognition so keeping a couple of these little nuggets tucked away on one of my monitors and setting them to track the GE PDQ Dashboard components or the Qs PDQ Dashboard components is like having a good buddy looking over my shoulder while I trade.
Other platforms may have features similar to the dynamic ticker, you should check on yours.
BTW, after a few exchanges with my trading buddy The Clueless One over the weekend I've modified the 3 FreeStockCharts on the right blog panel to be in sync on 2 minute bars. Also, keep in mind that the Qs (top) chart is not a VIXEN setup while the lower (GE) chart is.

Schwab VIXEN / NYAD Setup

This post is in response to a number of reader queries about the GE VIXEN. To help clarify how I use this setup in real time I'll show the one of the screens I watch during the day to trade GE.
Frequent readers know that my daytrading platform of choice is Schwab Street Smart Pro, which I favor for a number of reasons including the real time new daily hi -lo count scrollers (shown here tucked between the 2 larger GE charts) and the ability to drop comparison tickers on top of primary stock or ETF tickers. In this case I've got the VIX laid on top of GE on the left and the NYAD laid on top of QLD on the right. I've set the VIX and NYAD to display as mini-candles, although I can just as easily display them as a line or hi-lo bars.
I really like the Schwab NYAD, which is displayed as a ratio of advances/declines.
Although I posted the GE/NYAD studies a while back, it's still a killer application and I use it in conjunction with the VIXEN to catch as many setups as possible (and also to provide signal confirmation) I watch both the GE/VIX and GE/NYAD setups in parallel. There's over a dozen posts each on the GE/VIXEN and the GE/NYAD in the archives so , if interested, scroll back and read a few of them for more details on how the dynamics of these trades typically play out.
I'm not showing the actual trading window here, that's on another screen along with the scrolling 3 finger lead, the 7 finger lead, a dynamic momentum signal (proprietary to Schwab) and a few other windows (news, portfolio management, and a dynamic watch list that let's me replace GE with any other stock or ETF that I choose).
These setups work well for me because I trade only a handful of stocks and ETFs (actually less than 10) and I prefer to carefully study the dynamics and idiosyncrasies of my little basket rather than jump all over the market chasing the fast money.
Not for everyone, but it works for me.

Monday VIXology

Here's a little variation of the VXX Dashboard that I've been fooling with that involves pairing the VXX with a basket of currencies. While the model doesn't produce those 90% + linearity returns seen in some of the other PDQs the P&L is certainty impressive given that this model reflects only the last 6 months and that these are currencies.
Of particular note is the green status of the P&L status for each and every one of the pairs. I'll be tracking this little nugget in the background for the near term as the returns so far have been very impressive.

We did get a mean reversion move last week as the Qs worked off oversold levels and the VIX settled back to the LR30 upper channel band. With most of the volatility surprises prompted by earnings reports now in the past the technicals are strongly suggesting a continuation of last week's bump.

And, just to put things in perspective I've included a comparison of the VIX and VXX below. Peaks and valleys coincide but notice the LR30 down slope of the VXX indicative of a net decline of volatility in the VXX relative to the VIX.

Finally, a little side note here on the NYAD proxy gadget added to the blog on Friday. I neglected to mention that I set the gadget to display at 2x the amplitude of the NYAD in order to provide clearer indications of impending trend changes. There are two smoothing algorithms on top of the underlying detrend indicator and a doubling of the initial raw signal value to accomplish this goal. Keep in mind this chart does not necessarily reflect prices, but rather the momentum of the NYSE. With this template in place I can now create a NYAD-like signal for virtually any index and I'll add one for the Qs and the IWM in the future, just to test their forecasting value.

NYAD Proxy Gadget

I've added another new gadget to the right side of the blog. This time it's a real time proxy for the NYAD, the NYSE advance decline line that I use to confirm 100% of my trades.
I've mentioned before that I could probably daytrade quite successfully using just the NYAD and the pivots but I like the conformations offered by the MAs and the parabolics to take the edge off.
Just as a real time feed for the VIX is unavailable in FreeStockCharts, it's the same story for the NYAD. I've managed to solve the VIX problem recently by using the VXX, but the NYAD proxy required quite a bit more work. I've placed it between the Qs and GE VIXEN feeds on the blog so you can watch the NYAD dynamics on all 3 charts simultaneously.
The violet line is a composite of 6 different indicators and I regard the coding as proprietary, just because its development required so much time.
I've added a little momentum shadow behind the violet line to show relative strength and topped off the indicator with 7 (yellow) and 14 (blue) period linear regression lines that clearly indicate the direction of the short term trend.
Many thanks to Worden Brothers for making this product available. 3 years ago this level of technical refinement, user programming options and a real time feed would have cost you at least $60 per month.
Also thanks to readers for feedback on the GE VIXEN Trader, which seems to have generated a fan club of it's own.
I failed to mention a reliable entry/exit setup in the initial post so I'll quickly describe it here as shown by the green and red vertical arrows below.
Although I use the GE/VXX cross as an initial entry I'll add to the position when green arrow conditions present. On the other hand, when in the position, I'll exit when red arrow conditions present.
The red, green and yellow lines in the lower technical panel represent a 3 (green) and 7 (red) Moving average, while the yellow line is a FSC smoothed detrended price oscillator (DPO) that has been individually "tuned" for the Qs and GE charts shown here.
As with the NYAD gadget, I've also added a LR7 (white line) to the yellow line DPO to clearly display short term momentum.

VXX PDQ Dashboard

This PDQ Dashboard is the logical extension of my explorations into the volatile world of the VXX, an ETN based on S&P VIX futures. If only there were VXX options, then we could trade a derivative of a derivative of a derivative and wouldn't that be fun!
For this study I've turned off the risk buffers (ESP, ARMM and ELE) which would have otherwise put the RTH pair in OUT status.
Two other factors to recognize when looking at this Dashboard are . .
#1 . . the inherent beta of VXX relative to the rest of the pack and
#2 . . the fact that these are all divergent pairs (as opposed to convergent)
As such, the amplitude of the daily MoMo is going to get exaggerated much more so than the Qs or the FXY dashboards and therefore requires its own unique risk threshold baselines. While we're fiddling around with refining that algorithm the raw signals for the VXX generated by the dashboard have been consistently reliable over the past two weeks and will become a regular feature of future Monday VIXology updates.

GE VIXEN Gadget

I've added a new element to the right side of the blog panel to keep my daytrading posse amused. It's based on a FreeStockCharts (FSC) chart and uses GE and the VXX to signal VIXEN trades. The chart is set on 2 minute bars and tracks 45 bars or 90 minutes. Keep in mind that the VXX crosses have to be executed relatively close to the actual cross since scaling factors will literally move the cross point forward as time elapses. No looking back here.
One of the problems with FSC is that there is no live feed for the VIX or the NYAD, just EOD.
We can resolve that problem for the VIXEN trades by using VXX as a proxy for the VIX. I've mentioned the differences between the VIX and the VXX previously so won't rehash old ground here. Suffice to say that VXX actually trades at a market price, while VIX is a statistical value.
From a technical viewpoint, the VXX tends to display a bit more short term volatility than the VIX, but viewed on our little gadget, it's barely noticeable. The VXX is shown as a white line.

Here's a little snippet VIXEN trade from Monday's session, and displays how simple (and effective) these scalps can be. If you undertake this strategy you must pay attention to the trades or have fixed stops in place to protect your capital. Things can happen fast on these trades. My typical expectation is a trade duration that may last 10 minutes to 30 minutes, and getting caught on the wrong side of these trades can be costly.

PDQ Dashboard Update

The Qs Month End Tickler, which bought Friday's close at 41.00 did manage to eke out a gain today, but, being the nervous Nellie that I am, I bailed on the position at 10:55 as the NYAD parabolics fired a SELL at $ 41.40 and booked a nice little weekend gain. According to the system parameters I should have held the position 2 more days but I wasn't comfortable with the deteriorating technicals and one of my guiding mantras is "When in doubt, get out", and I did.

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Here's a peek at the status of the PDQ Dashboard per Friday's close as we've made some changes and (hopefully) improvements to the signal line.

#1 . . The pairs sets have revised - NEM has been deleted and UNG will likely follow as the N day cycle is too long and the number of trades is too small. VIX has been replaced with the VXX. The VXX is actually tradeable, with a daily volume around 1.5M and a typical .02-.05 spread. I had been noodling around with an algorithm to convert the VIX into a more in scale contrary indicator but, after a number of metric studies, I'm going with the VXX for the time being.

#2 . . the current Z score column has been augmented with a signal showing the current direction of the z score trend, which should help us determine if the trade triggers are getting more probable or more remote.

#3 . . The Final Signal column now is overseen by 3 programmable risk buffers which can be turned on or off independent of each other. These include a % loss stop, a % trailing stop and the position of the current equity line relative to the R2 slope based on a variable lookback period that coincides with the optimized N lookback period for that unique pair.

#4 . . El Jeffe', our programming guru, has added 2 little heat bars below the data columns to display an original signal momentum and a Final Signal momentum.

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Next to come . . . 2 PDQ models - one short term ( N less than 10), and the other longer term.

Also, a breakdown of net P&L for each side of each trade, which will help us see the relative attraction of each pair setup. New PDQs will be limited to 7 pairs including the VXX, which will enable me to run trade date sequencing on an EXCEL tracker, as with the case of the FXY study.

Monday VIXology

A strong change of character this week as the VIX displayed some razzle dazzle and a net 31% gain. Now riding well above the LR 30 upper channel, the VIX has retraced back to July 9th levels. Looking technically overextended on both the RSI2 and MAs, the VIX can and has played some nasty tricks on pure technical traders before so caution is advised here with my personal bias being to just focus on intraday patterns until we see how the next trend develops.
Conversely, the Qs look ready for a bounce at the current -.43 levels although we could as easily get a repeat of the late September, early October double bottom pattern so, once again, caution is advised before getting too frisky on the long side.
The PDQ dashboard is short the Qs in one position . .the rest of the portfolio is flat.
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Below is an update of the VIX pivot bands.
The emerging scenario suggested by this indicator of pivot volatility is bullish (for the VIX).

A Qomplete Reversal

Yes. . .I know how to spell. I post this only because it reflects a complete change of character and momentum in the Qs. . and it happened in one day.
We got another nice clean VIXEN signal (per yesterday's post) at 10:10 this morning, this time to the upside, and it held for the remainder of the day.
Plus, there were two nice bull trend confirmations to support the probability of an uptrend day.
1 . .the 3 composite MAs all remained upslope for the duration of the day, and
2. . the NYAD never fell below the initial opening pullback line. This is particularly significant and reflects solid buying strength (or short covering) throughout the day.
Although volume was about 15% sub par today, there was solid buying into the last 15 minutes so I'm expecting a carry over of the buying into Friday.
The Qs month end Tickler system is flashing a late buy signal.

An Old Bear Pattern

Taking a little break from my pair trading exploration, here's a snapshot of yesterday's Qs and the NYAD as seen on 5 minute bars. Quite a bit of quant blog traffic has been in an anticipatory mood, awaiting a bounce off oversold levels, but this chart should clearly show how unlikely such a move was on Wednesday.
For my own part, I was hesitantly bullish going into Wednesday's open if only because the NYAD typically falls to .08 to .10 levels prior to upside reversals and the previous intra day lows of the NYAD over the past few days have not fallen below .30. That changed dramatically yesterday as the NYAD made a steady descent to close at .11 as the VIX rose a full 12.5%.
For daytraders the real clue this was going to be a downtrending day was confirmed by the early VIX/Qs cross at 11:00. That was followed by a little whip saw and then another kiss off of the VIX at 12:00. The significance of these crosses has been examined in previous posts and reflects a pattern I call the VIXEN.
There were actually about 2 weeks of VIXEN related posts so if the concept intrigues you, scroll back in the archives for more details and examples.

FXY Dashboard Results

First, a quick update of the PDQ Dashboard signals for the Qs as of the 10-27 close. The signal line has a strong alignment of shorts, although today looks like it could present a potential pivot low reversal.
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Now, back to the real work at hand. . . .

Following up on yesterday's FXY dashboard spreadsheet, here's a snapshot of the signals generated by a consensus of 4 of more of the seven pair signals.
The green bars reflect LA signals, while the red bars reflect SA signals. A closer look at yesterday's spreadsheet reveals some slippage between the actual entry and exit dates for the various pair trades, which is to be expected as the inherent volatility of each pair is unique.
I've also shown some of my classic technical indicators on the chart, just to see how they align with both price dynamics and the dashboard signals.
While the FXY dashboard didn't capture all of the FXY price cycles, it did manage to trigger 8 of 8 winning Long trades and 3 of 4 winning short trades. Those are pretty respectable results IMHO over a 6 month backtest period for a 7 pair dashboard that averages a 13.5 N day cycle, almost 2 weeks to the day.
In future iterations of the dashboard, I'll probably cull N day pairs greater than 10. This will increase the net number of confirmed trades and, hypothetically, reduce the overall risk exposure over the duration of the open position.
So far this little experiment using a woven basket of highly correlated FXY pairs to trade the underlying FXY has proven successful and I believe we have the makings of a robust trading tool that can be applied to many other ETFs and stocks.
And, now that we have a basic template, we can track the signal line from this point forward.
Up until now I've manually executed the signal line, but by the end of the week we hope to have a working template in place that will automatically compute the true signal line for each trade based on some scalable loss stops and trailing stops and well as the critical P&L/R2 status line.

Pairs Basket Weaving

Sorry to display this spreadsheet in such small format but this seemed like the best way to show the correlation between the trade trigger dates generated by the z-score band reversals.
Double-click to zoom up and you'll see the trade dates for each of the seven FXY pairs.
Obviously, the UUP is the real chatterbox here, although we can easily adjust (reduce) the trade frequency by ratcheting up on the width of the Z-score band.
The whole argument behind using a basket of ETF/stock pairs to trade a single ETF (in this case FXY), is that the more high correlation pairs fire a confirming signal, the lower the risk of a losing trade. There's been some confusion in recent emails between the terms "correlation" and "convergent". These are 2 different concepts. ETFs/stocks can be convergence or divergent . . they typically can move together or move contrary to one another. . these are directional vectors. Correlation is a measure of how closely the ETFs/stocks move in relationship to one another . . this is a scalar.
We've clearly got some strong trade confirmation signals here and tomorrow I'll line up the PDQ signals with the FXY price chart.

Monday VIXology

Today I'm using a one-two punch for the VIX forecast.
The upper charts reflect the trend per the LR30 channel in conjunction with the Qs trend.
Technicals are now looking bullish for the VIX while the Qs ride the LR30 channel mean in the face of deteriorating technicals.
But what's at least as interesting is the behavior of the VIX PDQ Dashboard.
Using some of the pairs that were profiled originally in the VIX basket post, we can detect a pretty strong consensus from the Dashboard that VIX Long positions have not fared very well, with 4 of 4 Longs showing negative Momo . . . and these are not little numbers.
We're still fiddling with a more definitive Dashboard format, including a variety of programmable stops and risk management controls but, per our earlier posts, the basic model would have exited 3 of these positions once Momo reached 1.5 % while XLE would never have triggered a Long due to the BF status.
Notice that current z-scores of the 4 (hypothetically) long positions are all only 50% of the way to the band reversal values, suggesting more of the same to come.
Also keep in mind the previous caution that the VIX is a statistical value, while the pair ETFs reflect actual prices so you can't actually make these trades other than as options and the VIX values shown are not option prices, so the plot gets even thicker.
Our premise in using the VIX basket is not to execute these trades . . you can't . . but to use the power of the VIX/pair Z-scores to forecast market momentum.
At the present time the VIX Dashboard is showing exceptional alignment.

PD FXY Update

I'm back . . with a corrected N day algorithm thanks to Jeff's prompt turnaround. The current signal is actually not LONG but net OUT since the Firing Line filter (still on progress) would override the FXA and FXF long signals short term and the FXE long signal longer term.
Tomorrow we'll line up the momentum swings in the FXY relative to the trade reports of both the short term and long term models. I've been holding off this task until the Dashboard was in a more stable condition but, with the latest changes to the database, I believe we're there.
Stay tuned. . .this could be interesting.

PD FXY Dashboard

Here's another example of how using the PDQ Dashboard can provide forecasts for a variety of ETFs. Keep in mind that the PDQ is really a condensation of the my PairDicator Qs model (hence PDQ), so for today's post we're looking at the PD FXY Dashboard.

Using pairs for currency trading is nothing new. . there's always the Forex for those who care to venture there . . I've been there, done that and found too many broker shenanigans to keep my interest.

This is a different approach although I'd be interested to hear from active FOREX traders on how these signals align with their technicals.

As with the latest iteration of the PDQ, the optimized N (lookback days) values are presented in ascending order. . . in this case providing both a short and longer term forecast for FXY momentum.

And, just a clarification. . .although the Position may be listed as OUT there are still # Days listed. . . these are the number of days out of the trade . . so every Trade position is regarded as active.

I'm showing 2 Dashboards here. .the upper is as of Wednesday's close, the lower is as of Wednesday's open, so we can see the developing momentum in the MOMO values, the current z-score (showing proximity to z-score band reversals and the current FXY beta.

There is a little glitch with the results as seen with the case of FXE. The N values and # of trades don't reconcile and, as usual, this reflects the work in progress nature of this project. Actually, both results are valid, the problem is locking the optimization algorithm in either a long or short term mode until that model executes a P&L/R2 failure.

And you thought this trading thing was easy?

PDQ Dashboard Update

I've reorganized the sequence of Qs pairs to reflect the ascending order of the number of N days (optimized lookback period). This should yield a short term and longer term probability model when I can locate a few more reliable Qs pair candidates with 12-18 N day characteristics.
With the discounting of the BD type signals (P&L below R2), we're left with a residual of 3 signals, 2 longs and a short. Since the short is showing negative MOMO, the inference is that the lon side is the valid signal.
I'm still working with Jeff to implement the "Firing Line" filter for the trade signals that would cancel trades if the P&L/R2 status is below and descending (basically, a roll over of the equity curve). That filter should help resolve some of the current ambiguities in signal alignment.
There's still a few bugs with the PDQ Dashboard but these are being resolved and the forecasting model continues to be refined and made more robust at the same time.
As I've mentioned before, there are some very exciting possibilities presented by the PDQ Dashboard concept, both for daytraders and system traders, ETF and option traders.
I'll be exploring a few of these further in the weeks to come.

Pair Scans on ETNs

Bill Luby had an interesting post about often neglected ETNs (exchange traded notes) yesterday so I thought it might be interesting to run a pairs linearity correlation with the SPY against the ETNs just to see if anything popped out.

To back up a little bit, Bill ran a relative performance scan of the ETNs and found the top performer to be CRO, followed by NFO so we have a little benchmark to work with.

Above is the result of my pair scan using only SPY as the overriding index. I could have also plugged in DIA, VTI, QQQQ, etc, but just to keep it simple I stuck with SPY.

Mirroring Bill's results, CRO turns out to be the star of this little basket, but in this case we actively trade it against the SPY.

Keep in mind these are the results for the past 6 months only and not all trades are shown in the Trade Report. . . .but that is one nice looking equity curve!. Only 2 losing trades out of 42 -- .36 and .72 %. Great drawdown control.

But, before you jump hook, line and sinker into this trade there's a leeeetle problem: volume. Just as JJT turned out to be kind of a fantasy trade, I'm afraid CRO falls into the same black hole of illiquidity. In fact, of this dirty half dozen ETNs only NFO (IMHO) has sufficient volume to warrant trading but, another problem, it has a HTB (hard to borrow) status with several brokers, including Schwab.

Nevertheless, CRO is something to keep an eye on if volume picks up to a tradeable level.

Monday VIXology

These are the relative positions of the Qs and the VIX as of Friday's close. The VIX has now closed below the LR30 lower channel band, hypothetically putting it in oversold territory. At the same time, the Qs are sittng dead on the lower LR30 channel band.
A couple major differences here -- the VIX LR30 has been downslope for the past 2 months while the Qs LR30 channel has been upslope. The other technicals of note are the VIX's RSI, MAs and MACD, which all look poised to rebound, while the Qs similar technical all look poised to collapse. Net signal is bullish for the VIX and bearish for the markets.
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Below is the new look for the PDQ Dashboard thanks to Jeff's handiwork.
Of particular note is that the PDQ was flashing SELL signals for the Qs on Wednesday's open and the signal got progressively more bearish going into Thursday and Friday . . so I'm encouraged about this little tool's forecasting value.
We'll be adding one more metric to the "Qs Position" section and that's what I call the "Firing Line" which will take into account whether the current equity curve of each pair is above or below the R2 slope and whether the current open trade position is showing positive or negative momentum.
Basically this is a stop loss and/or trailing stop to keep us out of entering trades whose equity curves have begun to collapse and at the same time help us retain any positive gains that the open trade may have captured.
As such, a new signal will need to be added to our repertoire of long, short, or out an that will be "close open trade" or COT. Those of you who have followed the evolution of the PDQ Qs pairs forecaster should already be familiar with these trade conditions but, in an attempt to avoid any ambiguity in the signals, this seems like a wise addition.
This PDQ reflects values and signals as of Friday's close . . still short the Qs although XME is giving us a contrary signal on a new entry.