Any unhedged short risk is now flat

Unhedged short risk...which reflects a few accounts -  flat now. 1110 to 1091 for ES...on this trade.

For the record, on a conservative (small position size) allocation basis accounts are up 10% for the month with the daily systems. On an aggressive basis, meaning larger risk allocations as a percentage of liquidity, live accounts are up over 30% for the month.

ES RVS Swing Shorts hedged up

We have now hedged up our short exposure and will hold these hedged positions short going forward.

Market Comments

We covered most of our shorts today close to the 1099.5 level on the ES...and 647 TF is now flat from 667 also. Interestingly, the market may be postured for some upside probing...however the ES Swing system still has an open position an will look to add short if that is the case. All in all a very good day in a challenging environment. We are holding the remaining short as we close the books on a tremendous month.

ES RVS Daily Swing Adds another position

ES RVS Swing Triggers Short

Flat ES and TF

If people have questions about the recent trades...these are two accounts showing the actual real results for ES and TF swing systems. These are not the trend following systems. (Click on the image for a detailed view)

System Position Update

Below are the results of the swing system trades. Currently, this exit represents a hedge-point for the newest release of RVS and portfolios are hedged to limit the risk for the current trade. The trend following enhancements to the RVS model are now holding the short position till its deemed to be expired. Then the position will be closed. This means that the trade could extend for quite some time. I would like to add that though I have been using this blog to communicate with clients I will not be publishing all the trades or the latest model triggers via a public blog. It has been a very good mechanism to confirm, communicate and reference live and funded trades. We allocated around $50,000,000 on the ES trade, while the TF trade which took 35 points on this run, had around $20,000,000 allocated. I do think we were effective during very challenging markets.

This weekend I am releasing the updates to RVS and additionally, I am releasing some amazingly powerful forex systems with outstanding risk and targeting controls. We will be allocating a large amount of our assets to the forex markets, which I am excited about, but has also been very demanding from a development perspective. 

Regarding my take on the markets, I see a possibility for a bounce and the new RVS method sees this as a hedge-point, however, I reiterate my comments regarding the dollar and the markets as a whole, therefore, I expect to be much much lower over the near-term. And as I pointed out on Wednesday, the market cycle is a very large hurdle to overcome. If prices were to over come that cycle in the 1100 area in the ES I would view that as a significant achievement. 

In so far as I can be helpful, I will try to keep updates on my blog regarding the major inflection points in the markets - as I have done recently. However, there is reason for me to potentially a private (though not charged) blog where I can ensure a constructive and positive interaction on a proprietary basis. 

Today, i found the following chart on THEMAXFACTOR blog: 

Max has used my charts in the past and apparently possesses, at the young age of 15 in Switzerland (where apparently you don't have to go to school and you can spend all day trading the markets), the capability to produce high quality trades. Max made some very good comments regarding draw downs and risks and I appreciate that he has consistently reference my charts on his blog. This goes back to my previous posts regarding allocation amounts. However, what Max may have achieved in confidence/arrogance has not been matched by analytical ability. 

I would like to point out that one of the nice characteristics of these systems, especially the dailys is that they take the smallest positions early and the largest late. In the ES system we built a 20 contract position in the model (which trades live) with an initial 2 contract entry. This ensures in fact the the drawdown risk is significantly reduced and enabled an average price in the 1070's, which will look like a great fill when looked at several months from now. Therefore, the point regarding being deep in the red is curious and misguided. The market situation has been in a highly dangerous posture and may or may not have made it to ideal levels to short, this is why an initial position is initiated and the positions are built in the manner that they are. Additionally, there is a self assessed performance analysis and risk analysis basis for these systems to self-manage their trading risks, probabilities and allocation sizes based on their performance in the markets that they trade. This has been a considerable effort for me to build but is very exciting and has opened tremendous opportunities in markets that make the TF and ES look calm, Forex and commodities for instance. I do recommend that Max demonstrate more of what his most intriguing post and concept are as he seems to follow them very well as can be easily seen via the portfolio shown below. 

As most market participants know, trading and arrogance are not bedfellows though they are common occurrences and it seems even in Switzerland. For an example of "garbage in and garbage out", I highly recommend looking at Max's trades and his portfolio which has taken quite a few 50% draw downs lately and did not fare welll today...(included below) It is easy to know what to do when you don't have to do it. Its also easy to back date posts or post trades in posterity, As I have real money trading and real clients, I am keen to share the good and the bad and I have an interest in presenting thing in a way that builds a understanding and integrity, therefore, I make a deliberate effort to leave my posts unchanged and also post information as I it develops with no filter. I do hope that this effort is obvious. 

So, shorting the ES in the 1070's certainly was reasonable and trade risks within reasonable tolerances. The advantage of trading a daily system like this is that you are not likely to get into situations, like BP, where you catch the knife for 50% haircuts. This is also the reason, that I like to allocate 10 to 30% of the equity in an account to risk positions rather than more and also why I focus on index trading for equity style investments.

I have been overwhelmed with the recent development efforts and enhancements fto the RVS/HLA and Cycle models and risk management systems - which have been a mind numbing process of refactoring, rewriting and re-architecting and finally reimplementing the derived model functionality, trade controller and risk management infrastructure - a few times. Usually just about when I thought I was nearly totally done. This combined with fairly substantial capital allocation/management decisions has left me practically no time and mostly no energy to follow through on personal and exploratory opportunities (Vimal among a few others please accept my apologies)

Time for dollar rally and apotentail market crash

Dollar at huge support and ideal target. Market at top. Should the dollar rally, as I expect, it will be a huge rally and possibly catastrophic for the markets. Charts to come.

TF and ES add on the close

ES Daily Swing Short adds a small entry short at the close

I apologize for the late post...but I was not feeling well today and did not get to it till late.

TF Daily Swing system takes short - ES adds short contracts and comments

Market feels like it has been in full blown bounce mode prior to earnings season. Perhaps shorts profit taking or being squeezed prior to earnings season is contributing to the rise. However, I would like to point out that internals continue to be terrible. People have been selling leveraged risk all the way up on this bounce - and that is a really bad omen. You can see that in the reDeleverage analysis of SPY and BGU below. The leveraged BGU (gray bars) is selling at a discount to the cash SPY index and the trend has been increasing. This version of the analysis is a longer term view than the normal version that I generally show. 

Apparently, Jon Paulson (Steve Cohen etc...among others) are long everything that can be found - I am betting that that decision is based more on the same kind of gut move that got him into all those abacus CDS shorts than fundamentals or sound judgement (though that former idea had a fundamentals basis and required gut not to mention help from Goldman Tax and friends)...can't help but wonder about it this time. What happens to the market when a few over leveraged 30 billion firms are wrong?

In any case, the subject of sentiment is an integrally related issue and the above demonstrates that sentiment is still bullish. Theory says that the market is not bullish enough for a big selloff based on a bullish percent of 18% or so. I think there is reason to believe that we have not really bounced and have not reached enough of a bearish extreme appropriate for a substantial rally given overall market conditions.

I would like to point out a few things: 

• The above comments regarding long positioned institutions/HF's demonstrates that we have probably not gotten bearish enough to rally. Nor have we reached extreme bearishness either...something you would have expected to see with nasty volatility like has occurred. In addition, after the volatility that has occurred in market since may - to the point of panic - the market has become virtually untradable for most participants. I know of a few funds that do not have the choice to trade anymore due to all of the insanity. So, I think we have been too complacent to put in a bounce of significance. 

• In addition, the concept of A-B-C down does not fit well on the weekly chart of the SPX. It does not measure well without a new low and a new low will most likely setup a larger down move not a C. 

• Overall, very interesting action on very low volume with nearly every leveraged ETF risk trade being sold at a discount to cash in every market I have checked. 

• In addition, we still have big relative strength discrepancies in major markets/sectors that should be showing strength right now...and distributive internals.

• If the market were to attempt to rally further, there is quite a lot of "50 day MA" resistance above nearly every one. 

I think that its important to consider that the market has just not gotten bearish enough. And its at moments like these that its easy to miss big trades or get caught wrong footed.  Just some food for thought.

One other point, Monday's have been bullish and responsible for over 80% of the entire points gained since March 2009...perhaps just to fool everyone the market magicians will start bullish Friday's and Monday Madness. Start watching the historical Monday's.

I am doing a substantial new release this weekend of all the RVS and HLA systems. The last trade is slightly different due to the changes but essentially the same performance stats. TF System shorts the close as expected and ES System adds.

ES Daily Swing Short addtional contracts at the close

ES Daily Swing Short

ES Daily Swing System Covers

It may be premature, but the ES Daily Swing covered its short for a very nice profit. A warning sign for me is the bounce in the dollar may only be wave B and therefore the dollar may move lower for a new countertrend low and thus the market may trap a bunch of shorts again! surprise surprise. Very difficult setups in this market.

Note: SSO Daily, and ES Daily Income covered on the close also.

ES Swing System takes second entry short risk

Current Market Overview

I would like to talk about the current market setup. Below is a chart of the SP500 Swing System. This model took its first risk entry on the short side yesterday at the close. Please understand that it will likely take another few entries. Personally, I am hoping that it does.

Characteristically, options expiration can continue to squeeze the market. Therefore, I expect slightly better prices to short. The importance of this position is that, as I have indicated before, when these systems would trigger new shorts, the implications will likely be significant. I believe that to be the case. So, along with that plan I am looking at leap puts/protection slightly out of the money for 2012. I wanted to underscore that this trade or two should be very important. If the market is to remain uptrending then this area need to remain well defended. 

Additionally, I would like to point out that I have migrated from using Tradestation as the datasource for this system to IQFeed. This does change the number of trades becuase they do not quite have as much history as Tradestation. Also, as you can see the ES long trade from the end of may is slightly different. This is because I enabled and new capability of the model. That countertrend capability gives the system significantly better performance and a win rate of better than 94%.

ES Daily Swing System Goes Short

RVS ES Daily Income begins a short position and SP500 system overview

Whether or not the markets require more work to resolve the dynamic of the last weeks...any upside follow through on monday will likely lead to some pullback. If that pullback were to become something more extreme it would not surprise me. However, as I indicated, and counter to many bearish views, until the swing systems take shorts, I am not looking for a major inflection point on the upside just yet. I have stated before that it would be uncharacteristic for the SP500 swing systems not to catch a big short if one were setting up. I stand by that view.

Below are the charts of what is happening with some primary systems I trust for market moving triggers. I've also included the trade for trade equity curves. The ES swing system dates back to the inception of the futures contracts and is capitalized with around 20,000$ per trade. Please understand that to trade this system $20,000 represents an allocation amount and therefore represents a portion of an account.

RVS ES Daily Income

Dufus of dufuses...I have this model programmed to trade reversals but had the capability turned off. That has been updated on the trade servers and is in the latest release - so we WILL get reversal trades in live trading starting Monday. Below is the chart with reversal trades enabled. Obviously, we missed a trade. Also, below is a P&L for this Income system since inception of the ES e-mini futures (1999) with 10% of the profits reinvested. Starting risk capital is around $25,000.

RVS ES Daily Swing

Below is the same system with 10% of the profits reinvested. Starting weighted risk capital is around $25,000 for both PL's. All trades end of day market-on-close.

RVS SSO Daily Swing

Market update

I would like to reiterate the status of the market is BIAS SHORT. However, we are at major support levels, if they hold then the systems are setup to short a significant bounce. That bounce, ironically would be a right shoulder. I am watching these daily swing systems closely. I believe that when they call the short it will be  doozey...I will post that short when it happens...here are the charts for your reference.

I would like to point out that for some reason in the trade stats...I lost the margin requirements therefore the position sizes are not reflected correctly....meaning avgSize and minSize and maxSize...all else is correct. I have included a chart which reflect the system stats correctly below. Click on it for a detailed view.

Strategies Update

Looking to sell long positions at the close...this is not confirmed but looks probably at this point.