Gold Level Subscription Scorecard For December

December was an extremely quiet month for trade ideas. There were only 7 trade ideas closed during the Month. April and July both had 13 trade ideas closed, which was the previous low. This was due to a few reasons.

First, there were several trade ideas that didn’t receive fills. This was primarily due to the market gapping in our direction and not providing an entry opportunity.

Another reason for the low number of “official” trade ideas was the fact that no Catapults triggered. Catapults were plentiful in October and November. Typically 2-3 times each year there will be a decent sized cluster of catapult trades for traders to try and take advantage of.

Lastly, the action itself in December was extremely choppy. The S&P didn’t close in the same direction 3 days in a row at all in December. Several of the strategies are mean-reverting and mean-reverting strategies don’t trigger when you don’t get far from the mean.

Now for my usual caveats and explanations before unveiling the results.

I don’t suggest position sizes. The primary reason for this is I’m not acting as a financial advisor. I don’t feel it is appropriate to suggest allocation sizes without understanding someone’s financial situation and risk tolerance. Even for my own trading I run different portfolios with different levels of aggressiveness. For instance, my most aggressive portfolio is my IRA. Here I may use options to sometimes get 400-500% leveraged. Other portfolios on the other hand normally take much more conservative stances and some rarely reach or exceed 100% exposure.

Since I don’t suggest position sizes this is should not be considered a performance report, but rather a trade idea scorecard. Therefore, no matter how objective I try to be the reporting of the results is always going to be skewed depending on how you approach the trades. For instance, I always recommend scaling into the Catapult positions in 3 parts, whereas the “System” trades (whatever system I unveil other than Catapult) are normally one entry. The “Index” trades I normally recommend scaling into as well. For my own trading I trade much larger size with the index trades than any of the individuals. I also control my exposure by limiting the total amount invested per day. As I mentioned, this will vary depending on the account I’m trading. My most aggressive account I may put in up to 100%/day and get heavily leveraged using options. A more conservative account may max out at 15%-20% per day.

It’s unlikely anyone would have taken all of the trades with equal amounts, so personal results would vary greatly depending on the trader’s approach. All that aside, below are December’s results (click to enlarge):



In the next couple of days I will post a 2008 summary.

For anyone who would like to trial the Quantifiable Edges Gold Subscription you may do so by simply clicking here.

Links

I’m a little under the weather today, so rather than producing research myself, I’ve decided to add a few links to the blogroll and point out some recent articles I found interesting.

First the articles:

From Active Trader Mag I recently came across this interesting article which places bands around RSI levels rather than looking at absolute levels.

Market Rewind with tests of consistently oversold and overbought RSI readings. Incidentally, one feature of the new Market Rewind ETF tools shows 5-day historical short-term RSI’s on a massive number of sortable ETF’s. I’ve beta-tested the tool. ETF traders should definitely check it out when it goes live.

Can’t get enough RSI talk? Check out MarketSci and Woodshedder.

For those looking to improve their intraday trading, it’s not uncommon that Traderfeed comes up with a gem like this one last week.


Now few a few blogroll additions that are long overdue:

Behind the Headlines – Barrons columnist Michael Kahn offers more insights on his blog.

Skill Analytics – Would’ve thrown this one up there a while ago but he just didn’t post that often. Postings have picked up recently and he now provides a nice ETF correlation tool as well.

The Deipnosophist – Smart reading about the market.

I’ll save further additions for another sick day.

SOX Drop Could Be Negative For NDX

One bit of action I did find notable today was that the Nasdaq 100 gained over 1%, but the SOX closed lower on the day. It’s quite unusual for the NDX to put in such a strong performance without some help from the SOX. Historically this has had slightly bearish short-term implications for the NDX:

How The Market Has Reacted To 2.5% - 5% Drops During The Bear

The SPX closed lower by 3% today. I’ve looked at drops of 5% or more in depth in the last few months and found there to be a tendency for a short-term bounce following such steep drops. Tonight I decided to see how drops between 2.5% and 5% have fared since the beginning of the bear market.

In these cases further downside was more common. 84% of instances closed below the trigger price at some point in the next 3 days.

Quantifiable Edges Aggregator Suggesting A Short Bias

It’s been a long time since I’ve discussed the Quantifiable Edges Aggregator (click here for the July post and detailed explanation), and I’ve never posted a live chart of it to the blog, but I decided to do so today. As a quick refresher the Aggregator compiles all of the current short-term studies I have outstanding and consider “active”. Some of these studies are posted to the blog. Some only appear in the nightly or weekly subscriber letters. The Aggregator then produces a number which estimates how the studies collectively suggest the market will perform over the next few days. This is represented by the green line in the chart below.

The dashed line shows the average return of the S&P over the last few (in this case 3) days. The solid black line I refer to as the Differential line. It subtracts recent performance from recent expectations. When the Differential is negative it indicates the market has outperformed expectations over the last few days. A positive Differential indicates the market has underperformed expectations over the last few days.



As of last night’s close the green Aggregator was slightly below 0 and the black Differential line was squarely below 0. This means that the studies are indicating a slightly bearish bias over the next few days while the market has outperformed expectations over the last few days and is overbought. This is a configuration I will typically look for to enter short trades. A configuration to enter long trades would see both the green and black lines above 0. It’s important to note that the Aggregator is not a mechanical system. It is simply a graphical representation of my studies vs. the S&P 500.

For a free trial to the Quantifiable Edges members area and to see how I incorporate the Aggregator in my analysis simply click here.

When the S&P Jumps Higher Yet New Highs Contract

The number of new 52-week highs on NYSE came in lower on Friday than it did Wednesday. It’s fairly unusual for the S&P 500 to make a significantly higher high than the day before and see the total number of new 52-week highs contract. Friday’s high was over 3% above the previous day’s high.

To get a decent sample size I loosened the parameters to look at all times the S&P made a higher high by at least 1.5%. The results are below:

Twenty-seven of the thirty-one instances (87%) posted a close lower than the trigger price within 4 days.

New Years After Bad Years

With 2008 performing so bad, I decided to see how other years started off based on the prior year’s performance. Most often the 1st week of the new year following bad years in the stock market has done quite well – and substantially better than 1st weeks coming off positive years: