Wednesday, August 11, 2010

Key Trend Models

Today has the potential to end the summer rally and lead-off an intermediate decline into autumn.  We have seen them rally the market back into the close too often to remove the word "potential" from this analysis. 

A couple of things though: 

First, the Russell 2000 (low volatility settings) is the weakest of all indexes and was never able to turn up, summer rally or not.  It should lead the markets lower should this downturn be confirmed.

Second, yesterday we saw the VXX_240 Trend Model reverse LONG.  Today, the VXX_Daily Trend Model is close to a BUY SIGNAL, but not there yet.  Should the DJIA SHORT SIGNAL be confirmed  at the close today and the Daily VXX reverse LONG, that would be a strong combination of signals to usher in the long-awaited intermediate market decline. 



Anonymous said...

Wednesday,August 11,2pm EST
(day's mostly over)

Looking at SDS and VOLUME

comparing Today's breakout with the breakout from the June 21 (market top)

The first 3 days of reversal long SDS on June 21,22,and 23rd....shows significantly Greater Volume than the Volume of today (august 11)

june 21 was 36 M
june 22 was 50 M
june 23 was 64 M

compared to yesterday's
volume -- 32.5
and today's (as of 2 pm EST) volume

is only --- 23 M

Tomorrow's volume in SDS should make for an interesting comparison

The 3 rd day of the june 21 reversal was
64 M and the next leg 'down' (june 29 and july 1) was

even greater at 66 M and 70M

Shouldnt 'the real reversal new wave Down' come with real follow through signified by greater volume than today's 20 M.?

If we dont have a larger sell off at the close today and If we dont have strong follow through tomorrow in the 60 M volume range

I would be tempted to call this movement ... very mixed,and prone to another whipsaw or stuck in a range between supports,Holding and ranging.

There are many strong support levels in the S+P

1087-92 area
1075 area
1060-63 area
1040-45 area

I want to
Be prepared
Be patient
but not just jump at a panic driven sell and lowish volume.

Wheres the Volume and the Follow thru.

The other indexes look the same

Anonymous said...

Hi Allan,

Thanks for the insights.

Looking at you trend model, I have two question for you, if you don't mind.

First, if it has been optimized, has it been optimized once for all (in other words it is always the same algorithm copy and pasted) or did you run the optimization for each security/each time frame?

Second, are you going to test it also on commodities/futures? If I'm correct US stocks and stock indexes are quite choppy markets. Future or commodity markets maybe (I do not know) are more trendy. Furthermore they may present opportunities for diversification, in a kind of portfolio approach.

Thank you


A said...

Re: the algorithm has not been optimized much at all, using my own generic default settings across the board in a " best fit" sort of analysis. The fact is that almost all variations of settings are effective, its just a matter of frequency of trading and win/loss accuracy. Net points gained are pretty consistent.

As for commodities, the trend models will work just as well and would make for a completely diversified trend following regimen. But, most of my subscribers are only interested in stocks and equity etf's so that has been my main focus.


Anonymous said...

Allan , follower here for many months and watching and tweaking atr along with you . question, what settings are you using with that IWM chart? My Daily chart looks nothing like yours with 7 x 2.0 settings. Thanks , Rick . So Cali

A said...

Try 4.0 for the multiplier. Its what I call the "low volatility" setting and it performs as well as the 2.0 setting over the longer term, but trades less frequently. Signals are delayed by a few bars and most traders are not that patient.