SP500 RVS 2.0 back to 1983...

This is a example of the historical equity returns for the SWING implementation of RVS on the Large SP Contract SP500 futures market first trade 1983, $1,000,000 allocation average trade size is $250,000. (0% profit reinvestment).

This is the first time that I have run this RVS version 2.0 model on data this far back...not bad...for nearly 30 years of Fed and government manipulated bubble blowing markets.

Thoughts and things

The systems covered shorts on Thursday and are setup for a rebound bounce. As I indicated in my post regarding the GM IPO, this IPO needs to go and the idea that the market will "lose a bid" easily is best to be considered with skepticism. By all indications, if the RVS model setups look well, and I personally think that they do, we should see follow through on the upside, possibly enough to get people to forget about those Hindenburg Omen thingy's. It intriguing that when there is a Dow Theory confirmation in either direction the market usually reverses as everyone seems to take the popular position and has to go through some pain first. It should therefore, not be surprising to see the same thing happen with all the negative confirmations occurring over the last weeks. I think that this short setup will be a dynamic trade and therefore, I do want to reiterate the danger in the markets here. I will keep you posted as to what things are looking like. Other than this trade starting to setup there is not to much going on in the markets except for the continued de-correlation of accepted arb trades and the correlation of everything else caused by continued money volume contraction via bankruptcy, fear and de-leveraging. If the market were to totally fall out of bed without this bounce I am expecting that would be VERY negative indeed...and I would also like to be in the trade in a big way...which I am not now.

Last week, we had a very successful release for me and also an achievement that I was not expecting...I have recently completed a large effort to build an array of spline based calculations into my models to assist with dynamic trade allocation, entry methods and many other capabilities. I applied these calculations to the allocation trigger methods as an initial step to implementation and the results were, well, shocking: 100% winning trades Long and Short in the ES since inception on a position basis. The funny thing about this, is that none of the trading decisions changed at all, only the risk assignments and entry methods. Therefore, all the trades that have triggered this year in live trading are still in the model but the model now achieves a much better average position price and that new capability pushes the complete historical trading for the ES to 100% wins for 10 years+. The SPY, SP large contract are in the 98+% level since inception. I have posted a chart below that shows a brief performance summary for the ES contract. This is a live system and is set to trigger live trades as per the new release last week. On a trade for trade analysis, the win rate is 87.5%. This means that the individual entries that are marked with the red lines are calculated as losses even though the over all trade is a profit.

I will be showing a video shortly demonstrating the curve-fit risk for the over all enhancements to the RVS systems, which is extremely low, as the same system shown below, trades many other non-correlated instruments, ETF's and futures with no model changes at all with 90+% winning trades and very consistent equity curves.

I went out on Friday, stayed out a little too late and celebrated, so I had a slow weekend. In any case, I did hear some great Jazz. This pianist Mike Gerber is resident in Miami and is a tremendous talent. He is blind and not insignificantly losing his hearing...which makes him all the more amazing. I heard him play with his trio...the guest drummer was a 16 year old named Nick Neuberg. This kid is going places in the Jazz world. Its really interesting to see these guys interact, explore and learn. Its also a testament to a different type of learning that the creative world brings versus the academic one. We can blame the academic one for our current financial crisis and the adoption of Keynesianism. I think that there are significant parallels to the way that creative thinking works and the concept of how free markets work. Currently, we do not have the right framework for markets because the basis of our thinking as a society is so foundation-ally dishonest and distorted - we also do not have free markets which should not be surprising given the basis. We need to establish that more and that's why I want to spend more time with musicians and working with kids to help them to get more experience with dynamic learning and problem solving via the arts.

I had the chance to hang out with Mike after he played and he is learning as much now as he was when he was a kid. I think everyone needs that in their lives more...when you look at Nick in the video on this post...its just amazing to me that he is so young and able to hold his own with heavyweight talents like Mike Gerber, Ira Sullivan and Jamie Osley.

Finally, the new release is out

After three months of very hard, frustrating and challenging effort, the new release of m3RVS is deployed. This release includes significant enhancements, a centralized trade controller, slippage reversal engine, risk manager and allocation pool capability. The improvements are dramatic for most of the systems and those results were already very strong.

I appreciate the patience and support of everyone who has been listening to me bicker about this release...but has been worth the effort, most definitely worth it in my book.

Below is an updated view of the new capabilities applied to the ES Swing strategy from inception. Average risk capital in trade, $34,000. For reference you can see the previous results here: RVS System Reference Performance Data for major index futures

Below is an updated view of the new capabilities applied to the ES Income strategy from inception. Average risk capital in trade, $20,000.

For both of these systems, they factor 1.5 points of slippage on the ES and $5 in and $5 out for trading expenses. There is no compounding (reinvestment of profits). In real trading, slippage reversal functions generally generate positive slippage for the systems in the market and trading fees are more like $1.5 to $2 per contract. 

RVS System Reference Performance Data for major index futures

For reference, below are a few of primary trading m3 vehicles and their performance analysis and allocation mapping. The systems are based on $100,000 max trade size though we are trading them with very large allocations. These systems are designed to trade very large position sizes without negative effects from slippage or prohibitive execution costs. We have factored excessive slippage and execution costs into the performance results for these systems with almost indiscernible effects on the final results - this is due not only to the high win rates but also the high win dollar ratios and high point gains of the trades. For example, the average win on the ES Swing System is nearly 25 ES points. Factoring 2 to 3 points of slippage (which is highly improbable for this market) does not impact the system's ability to trade profitably nor does  factoring in transaction costs of $20 per contract impact the systems ability to trade profitably.

The SSO Swing system for example uses an average trade size of $29,600. This same system runs with 94% accuracy on the SPY since its inception nearly 20 years ago. We will be enhancing the reports and updating them monthly as the new performance data is generated. These links will remain valid will automatically update to reflect the incoming data as it is added.