S T R A T E G I S T   N E W S L E T T E R

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Archive of Model Observations

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This document contains previous commentaries about model performance (e.g., the Voted QQQQ Signal and the Grail Signals), as well as notes about portfolios.

Model Observations (Friday, 5/9/08): The market 'held' decently on Friday, although it gave our recent Long a very slight drawdown (-0.06%). It seems clear that the market dearly wants to go up, and if the price of oil ever starts to normalize, then a strong upward move is quite likely.
Model Observations (Thursday, 5/8/08): The extremely high price of oil continues to act as a damper on the market, and in fact it is surprising that the market can go up at all under such conditions. Today at least got us out of our Short with a decent gain, and we also ended up the day 'in the Black' on our new Long ... so no complaints.
Model Observations (Wednesday, 5/07/08): We were pretty sure that the market would head downward on Wednesday, but of course it is never possible to be 'certain'. It was an excellent day for our model, and we 'believe' that the market would have lost some ground even if oil had not spiked in price – but we will never know...
Model Observations (Tuesday, 5/6/08): Although the signals for Tuesday were weak, and although our Model flip-flopped back and forth several times as it further optimized itself overnight ... moving to a SELL/S and then back to a BUY, the official signal (TimerTrac) remained a BUY ... and Tuesday proved our model right. Now, for Wednesday we have a fairly clear-cut SELL/S (SHORT) signal, and so we will once again change directions.
Model Observations (Monday, 5/5/08): After switching from a Short to a Long at the Open price today, we ended up with a slight drawdown of -0.29%, although prior to the Open (say at 7-730am ET) it was possible to make the transition while QQQQ was still depressed by $0.14 or so (when we are holding a Short, and when our new signal is for a Long, then we generally try to get out of the Short 'prior' to the market Open – and especially when the pre-market period is weak, and thus to our advantage).
Model Observations (Friday, 5/2/08): Our Short worked well most of the day on Friday, but then QQQQ moved up just past the unchanged mark and increased our drawdown very slightly (-0.16%). However, although the signals are a bit weak and indecisive, things look 'Long' for Monday ... and so we are switching to a Long position for QQQQ.
Our current Voted QQQQ Signal model now back-tests at 85.0% accuracy for the past 6 years (actually 5.75 years), and it wants to be Long 61.8% of the time – the PERFECT percentage (Fibonacci Ratio). So, although it occasionally shorts more aggressively than some people are comfortable with, it will go Long every time that it looks reasonable.
Model Observations (Thursday, 5/1/08): In the few days before and after a Fed announcement, extra caution is always essential. This proved very true today when the market inexorably marched upward and crashed through our rather tight protective stop at $47.36 (QQQQ Open + 0.271%). The correct play was to close out the Short at this point and go to cash, saving -2.84% of additional shorting loss. An even better play, although one that is not currently a part of our standard procedure, would be to reverse at that point, and go Long up until the Close ... at which point the Short would be re-instated. In any event the protective stop today was much less optional than usual, and it was tight enough (Open + 0.271%) to give a clear and early indication that action needed to be taken.
Analysis of Recent Model Behavior: Depending on whether stops were taken or not, our recent shorting drawdown ranges from -4.79% to -7.19%. These are hefty values, and in such cases we always try to see if our model could have done better. The sequence of events started, of course, with Google's announcement after the Close on 4/17/08, causing a major gap-up at the Open on 4/18/08. Despite continued analysis, there is simply no way that our model could have taken any other action; there was no way to know that Google's numbers were going to turn out to be stellar, and furthermore, our Protocol doesn't currently provide for actions to be taken 'after' the Close. Nonetheless, we are beginning to consider preventative measures when Google's next earnings announcement takes place...
Our posted signals have stayed Short continuously since 4/16/08 (and we notice that one of our competitors (kt-timing) has been solidly Short since 4/14/08), but as our model continues to optimize itself it has retroactively 'discovered' some Long periods embedded within this larger interval; these occurred on 4/24 and 4/28-29. As usual, the fact that the model belatedly sees different signals doesn't affect our posted performance (via TimerTrac), but it is nonetheless encouraging to see that the model continues to 'learn' new market behaviors – and that there is enough power in our indicators that they can adjust to new situations without degrading previous back-tested performance. Moreover, we have been able to identify a specific combination of indicators that 'would have' generated a BUY for 5/1/08, based upon our neutral MTI reading (1.0), combined with the fact that the preceding day had had a Fed announcement, AND combined with the fact that our generalized candlestick (Table 2) prediction for QQQQ (see the Prediction Table) had jumped up considerably in Wednesday's numbers. So, we have added this new Rule to our model, and it 'may' serve to protect us when similar situations occur in the future. Despite all of this, however, we don't see any way that a BUY can be generated for Friday ... and so we are staying Short.
Model Observations (Wednesday, 4/30/08): Our Short held up well on Wednesday, although it was a 'nail-biter'; our (optional) protective Stop would have been set at $48.05 (Open + 0.727%), and QQQQ actually exceeded this bv $0.01 (reaching $48.06) – showing the importance of either allowing some margin for error, or monitoring the market in real-time when the Fed announcement is issued. Our QQQQ Shorting drawdown decreased today to -3.92%, with about 2.70% of that resulting from the overnight Google-engendered surge, and 1.2% of subsequent slow declines. The Short continues for Thursday.
Model Observations (Tuesday, 4/29/08): Although we got the tone right for the Dow (DIA) and the S&P (SPY), the big 'techs' (QQQQ) continue to ratchet slowly upward. Apparently there are some large-scale purchases going on, perhaps in anticipation of favorable news from the Fed on Wednesday, or perhaps in the belief that the worst is over and stocks will not get any cheaper. In any event, our QQQQ Shorting drawdown increased today to -4.78%, with about 2.70% of that resulting from the overnight Google-engendered surge, and 2% of subsequent slow declines. Wednesday will, of course, be a tricky day; although our Short continues, we have a protective stop in place in the event that the market turns against us in a major way once the Fed announcement is made.
Model Observations (Monday, 4/28/08): The market continues to hold at elevated levels (in spite of astronomical oil prices), and this is probably partly due to the positive anticipation that leads up to a Fed announcement (which takes place on Wednesday). Nonetheless, although it is not a lot of fun to hold a protracted Short position when the market shows such tenacity, we feel that the market is steadily weakening and is overdue for some consolidation. Our Short continues for Tuesday.
Model Observations (Friday, 4/25/08): The market continues to show surprising tenacity, although we perhaps saw some cracks in the edifice on Friday when QQQQ ended lower. The drawdown on our current short is now at -3.79%, although 2.74% of that occurred between the Close on the 17th and the Open on the 18th following Google's announcement. In other words, we are only down about 1% more than we were on the morning after Google's announcement (an event over which we had no control whatsoever), and so we don't seem to be in danger of suffering significant additional losses. In any event, the Short continues on Monday and we may see some continued reduction in our drawdown. In the future, however, we 'may' take note of those days in which Google (or Microsoft) is going to come out with an earning's announcement, and set up a protective stop 'just in case...'. Such special measures, of course, go well beyond the province of a market 'timing' algorithm.
Model Observations (Thursday, 4/24/08): The market continues to show surprising (to us) strength, reflecting the prevailing BLUE market color code and our neutral MTI value (1.0). Nonetheless, our Short will continue on Friday, and once again the after-hours action today suggests that the Short may work better tomorrow. In any event, our current drawdown is now at -4.05% (most of which is due to the post-close Google rally). Our QQQQ Voted Signal has now reached a record accuracy (back-tested) of 84.5%, but it may be almost impossible to push this level higher without increasing drawdowns and decreasing annualized gains. This number does seem, however, to represent a near-optimal balance between competing factors, and it has the advantage of reducing our trading frequency by a significant amount.
Model Observations (Wednesday, 4/23/08): The market continues to 'hang tough', reflecting our BLUE market color code and our neutral MTI value (1.0). Nonetheless, our Short will continue on Thursday, and the after-hours action today suggests that the Short may work better tomorrow. In any event, our current drawdown is now at -3.13% (ALL of which is due to the post-close Google rally). Our model originally wanted to go Long for Thursday, but it seemed clear to us that this was predicated on some very slim evidence; we found a model enhancement, however, that preserved the Short while at the same time boosting our overall back-testing gains ... and raising our back-tested accuracy figure to a new high of 83.11%. Our goal now is to develop an 85% model (combined Long/Short back-tested trading accuracy of 85%). Whether or not we can achieve this is still not clear, but 84% will likely be do-able and we will give it a shot.
Model Observations (Tuesday, 4/22/08): Today was a pretty good day for our 'short', reducing our drawdown to a more palatable -2.00%. Our shorting signal continues for Wednesday, and perhaps we can reduce our recent loss still further.
Model Observations (4/21/08): In hindsight our Voted QQQQ Model would have picked a BUY for Monday, and this is 'ok' because we want our model to continually refine itself, but we are glad that we did in fact have an official 'short' for Monday. Why? Well, it was overall a rather negative day and thus we got the tone right, and second, we don't like it when our model switches 'too' often (and especially when we are 'in the hole') and third, because the market looks even weaker for Tuesday. In any event, our Short continues ... and with the current drawdown at a still not-too-bad -3.54%. If it had not been for the Google-triggered after-hours surge we would be quite pleased with the recent call; as it is, it's the hand we were dealt.
Model Observations (Friday, 4/18/08): As it turned out, most of the damage had already been done by Friday's Open. Google's positive announcement, and the market's irrational response to it, had turned our 0.31% shorting gain (as of Thursday's Close) into a -2.29% shorting loss (as of Friday's Open), that widened slightly by the Close to give us a net -2.82% shorting loss. As it turned out, it 'would' have been productive to go Long at Friday's Open, but our signal called for a continued Short and so we were gratified to see that the additional damage was rather slight. Our Short continues for Monday, and we are hopeful that the damage will begin to reverse.
TimerTrac Performance: If you look at our actual QQQQ performance over the past 6 months (click the TimerTrac medallion on our website), you can see that we are now up about 19% (since 10/16/07), versus a Buy-and-Hold strategy being about -17% 'down'. This gives us a 36% differential, and we believe that this 6-month spread will continue to widen as we go forward. We will keep close track of this 6-month statistic because only 'recent' performance counts for anything in this business. Our model in effect changes every day (hopefully becoming more accurate in the process), and by keeping tabs on this 6-month 'moving' statistic we will have an early warning sign if things begin to go awry. Our number yesterday was 37%, and today's number is 36%, and this is because in a 6-month period an old day drops off every time a new day is added. So, this statistic will oscillate around a bit from day to day. In any event, 36% is good ... translating into a 72% lead over Buy and Hold during the course of a year. This differential makes a good statistic because it shouldn't be affected in a major way if the market is trending up, or down, or just oscillating. If anything, the differential 'should' widen considerably during choppy markets as the advantage of 'timing' manifests itself.
Model Observations (Thursday, 4/17/08): The market showed quite a bit of resilience on Thursday, perhaps reflecting the rather high MTI value that we had calculated. Nonetheless, our Short 'worked' OK, giving us a net gain of 0.35% for the day, following a gain of 0.91% from our closed-out Long. Our Short continues for Friday, and it will be interesting to see how well the fanatic buying that followed Google's after-the-close announcement will carry over into Friday.
Model Observations (Wednesday, 4/16/08): There really wasn't much doubt about today's outcome (last night's set of indicators were just 'too' good), and we had a massive win that put our recent Long firmly back 'into the Black'.
Model Observations (Tuesday, 4/15/08): Today was a clean 'win' for our QQQQ signal, although it was sorely tested. Even better is the fact that we are staying Long for Wednesday, and have a good shot at breaking back into the Black after our losses on Friday.
Model Observations (Monday, 4/14/08): Our Long was unable to gain traction on Monday (although there was no dramatic weakness either), and as a result our drawdown deepened slightly to -2.09%, but the situation 'ought' to improve considerably on Tuesday – and our Long continues.
Model Observations (Friday, 4/11/08): Right into the jaws of death ... our new Long got off to a terrible start, although the “EXIT” (2.644% below the Open) did not trigger, leaving us Long going into Monday. The previous short wound up, however, with either a gain of 1.01% (if the position was closed out at Friday's Open), or a loss of -0.31% (if Thursday's EXIT had been taken). TimerTrac, of course, will show the more favorable outcome in its graphs since we are NOT able to apprise it of protective stops, EXITs, or 'profit targets'. Although our model continues to do well, it is interesting that it HAS NOT changed its mind about Friday; we remain convinced that if had not been for GE that the market would in fact have risen on Friday.
Model Observations (Thursday, 4/10/08): Our new Short got killed on Thursday and triggered an EXIT to cash at $45.62 (Open price of QQQQ + 1.516%). However, we are reverting to a LONG on Friday, and our Voted QQQQ Model 'now' (too late, of course) sees Thursday as a BUY as well. So, our Short ended up with a net loss of -0.31% (versus a Buy-and-Hold that would have gained 0.31%), and we will start our new Long on Friday morning at QQQQ's Open price. It is interesting to note, however, that in 'retroactively' deciding that Thursday should have been a Long (which would have been very profitable for us), the bottom-line back-tested Long/Short accuracy has actually risen to a full 82.8%. We don't like our model changing its mind retroactively (although this is an inherent aspect of the modeling process), but what would be worse is if it DID NOT change its mind.
Model Observations (Wednesday, 4/9/08): Our new Short worked well today, and we were able to close out our previous Long with only slight additional damage. The final drawdown for the Long was -0.63% (or -0.32% if the (optional) protective stop had been taken on Monday). We are Short once again for Thursday. Notice that although our Profit Trigger was 'hit' at $44.91, it effectively made no difference to our 'score' since QQQQ closed at essentially the same price ($44.90).
Model Observations (Tuesday, 4/8/08): First, in retrospect our model now signals a Short for Tuesday. That being said, what counts is that our 'official' (TimerTrac'ed) signal for Tuesday had been a BUY. On that basis our current drawdown is -0.59%, or -0.28% if the (optional) protective stop had been taken on Monday, and 'IF' QQQQ had been re-bought prior to the Close; if one had delayed re-buying until Tuesday's Open, then the picture is even better because there was some gain during the day. In any event, we are going Short for Wednesday.
Model Observations (Monday, 4/7/08): Our (optional) protective stop was appropriate today because of the gradual slide that followed the strong opening. For QQQQ this would have 'saved' about 0.31% (Open price – 0.537%) if QQQQ had been re-bought prior to the Close (our standard procedure), or xxx? If QQQQ is re-bought at Tuesday's Open. Without the Stop our new Long is -0.02% in the Red, but our Long continues for Tuesday.
Model Observations (Friday, 4/4/08): We officially closed out our Short on Friday morning (at the open price of $45.77), which actually gave us a small -0.15% 'official' loss on the trade. However, for the purpose of tracking our trading accuracy, we will nonetheless count this as a Win since we had emailed out a QQQQ signal change to a BUY prior to the market Open on Thursday ... recommending not a belated switch to oa BUY, but rather that a protective stop be put in place to protect the opening gains. In any event, it was easily possible to turn a slight profit on the trade, and a Long wouldn't have been very productive either.
Our new Long got off to a good start on Friday, began doing very well indeed up until late in the day, and then ended up with a modest 0.20% profit. There's nothing wrong with that, and we remain Long for Monday ... .so we shall see.Model Observations (Thursday, 4/3/08): Very early on Thursday morning (6am CST or so) our Voted QQQQ model managed to tune itself into a BUY situation; the fact that this took hours of cpu time to happen shows how finely balanced the day would be on Thursday. Since we were 'officially' in a Short position, and since we DO NOT change our signal once TimerTrac has received it (late on Wednesday night), we decided to issue an email in the pre-market period warning subscribers to set close stops so as to protect some of the Shorting gains that had been made by the time of the market Open. We ourselves covered our Short at approximately the Wednesday close price ($45.47 to $45.49) shortly after the market open on Thursday, and we stayed in cash the remainder of the day. Our 'official' position, of course, was to hold the Short the entire day, and on that basis our current shorting gain as of Thursday's Close price was a meager 0.24% (and this is the way that TimerTrac will score it). Since we are now going Long for Friday, we are likely to see at least a slight shorting Loss as we cover and go Long on Friday morning.
Model Observations (Wednesday, 4/2/08): Our new Short got off to a wobbly start, but ended up producing a 0.46% gain for the day. Our Long closed out nicely as well, since the market opened up a bit higher, giving us a gain of 4.70% from the Long.
Model Observations (Tuesday, 4/1/08): There isn't much to say; our anticipation that the market would at least hold on Tuesday, if not move up sharply, was exactly right ... giving us a gain on this 2-day Long of 4.44% as of Tuesday's Close.
Model Observations (Monday, 3/31/08): Our Short ended up decently (with a 2.37% gain), and our new Long got off to an unexciting start ... with a meager gain of 0.16%. So far, so good.

Model Observations (Friday, 3/28/08): Our Short once again did well, boosting our current shorting gain to 2.73%, and maintaining our recent 80% trading accuracy (for the last 10 trades). Notice that our MOS (Market Open Signature) analysis on Friday morning (based upon the Prediction Table: PREDTABL) was borne out during the day when our Short once again proved correct.

Signal Change: For Monday, however, we are going back to Long. The justification is thin (as far as we can see), but we have learned to trust our model (especially when it decides to go Long); our current Protocol, however, is to experiment with model 'extensions' that might keep the model Long when in fact it has decided to go Short. Such model extensions are only permitted, however, if the following conditions are met: (1) the change to the model actually 'improves' performance over the back-testing period (almost 6 years), and (2) the change is 'logical' (i.e., based upon our existing set of indicator values and neural networks). We reject such model changes that attempt to force a Long if there is NO back-testing support for such a change.
Trade Triggers(TM): We are continuing our efforts to add as much protection as possible to each trade by supplying (optional) protective stops (when the position is re-established at the Close), profit targets (when profits are taken and the position is re-established at the Close), and trade 'exits' (when we go to cash and stay there until a new signal is available). We have recently extended this logic so that occasionally both a 'profit target' and a Stop (or Exit) are both generated (covering both market extremes). Our goal is to increase the bottom-line gains as well as to allow trades to be handled by 'Trade Triggers' (to use Ameritrade's nomenclature); for example, a profit stop can be implemented by setting up a Trade Trigger to occur when QQQQ reaches a certain critical value, at which time a Trailing Stop can be automatically initiated that will trail QQQQ upwards ... setting an increasing 'floor' that is $0.10 or $0.15 below the current price. In this way it is often possible to make further gains by grabbing as much profit as possible as QQQQ continues higher. At the same time that a Trade Trigger is in play to grab profits (if QQQQ soars), a Protective Stop (or Exit) will sometimes be specified that will protect profits in the case that the market reverses. All of this is an ongoing research effort.Model Observations (Thursday, 3/27/08): Our Short did well today, boosting our gain to 2.24%, and locking in our recent 80% trading accuracy (for the last 10 trades).
Model Observations (Wednesday, 3/26/08): Our new Short (initiated on Tuesday morning) has now moved into the Black, even if only by $0.01. We will continue the Short on Thursday, and hope that we obtain a more significant gain. Since our 'average' shorting gain is about 1.3% (based on back-testing), we should 'expect' better results than our meager winnings thus far.
Model Observations (Tuesday, 3/25/08): Our new Short got off to a weak start today, handing us an initial drawdown of -0.27%. Still, we are holding the Short into Wednesday, and hopefully we will begin to make headway. Our previous Long finalized with a net gain of 8.28%, which is a superb gain.
Model Observations (Monday, 3/24/08): One more day of “Long” puts our recent gain up to 7.87%, although we would have lost -1.38% of that if we had taken the 'profit target' at $43.97 today (and then re-bought at the Close). We are going Short for Tuesday, however.
Model Observations (Thursday, 3/20/08): Our Long gain is now back up to 4.36%; while it would have been ideal if we had called a Short for 3/19 (rather than continuing our Long), we had nonetheless set a cautionary tone for the day ... and in our continued model optimization process the QQQQ back-tested signal now does indeed show a Short for 3/19/08.
Model Observations (Wednesday, 3/19/08): Our concerns about the viability of our Long on Wednesday were justified. We didn't reach our 'profit target' (at $43.95), which would have justified taking profits and going to cash, and since we didn't have a 'protective stop' set for Wednesday we were 'officially' forced to hold the Long QQQQ position for the entire day. However, we did warn subscribers to protect their profits if the market showed weakness (which it did early on), and hopefully most of you went to cash before QQQQ had dropped much below Tuesday's Close price of $43.33. Our model was delicately balanced about Wednesday's call, and in fact it now sees Wednesday as a Short; this is fairly typical behavior for this type of model when the indicators are exactly balanced (positive and negative forces are roughly equal). It is frustrating when a model changes its mind in hindsight, but it is also indicative of a 'good' model .. one that is continually adapting to changing market conditions.
Model Observations (Tuesday, 3/18/08): Although our Long didn't look very solid for Tuesday, we felt better knowing that it was a 'Fed' day, and as everyone knows it turned out to be a very good day for a Long indeed. Our current gain on this recent Long is 4.94% (and it gives us a combined gain of 11.29% since 1/25/08).
Model Observations (Monday, 3/17/08). Our Short finished up in fine style, giving us a gain of 2.23% as of Monday's Open, and our new Long got off to a good start as well, producing an initial gain of 0.46%.
Model Observations (Friday, 3/14/08). Our Short finally dug itself out of its hole on Friday, leaving us with a negligible drawdown of -0.05%. There was a profit taking opportunity on Friday that would have allowed us to exit with a good profit, but our model didn't set a 'profit target' and so we held the Short until the Close. For Monday we are reverting to a Long signal, although our model is probably figuring on a very short-term bounce in anticipation of the Fed announcement ... and NOT because the indicators look particulary good – which they DO NOT.
Model Observations (Thursday, 3/13/08). Our reluctance to go Short turned out to be well-founded; the market opened significantly down, paring our recent Long gains to a mere 0.74%, and starting our Short on a day when the market tenaciously fought its way upward later in the day ... giving us an initial shorting drawdown of -1.67%. Nonetheless, everything pointed to a lower Close (including our MOS analysis in the Prediction Table – predtabl.txt), and we did but follow the 'probabilities'.
Model Observations (Wednesday, 3/12/08). Our continued Long looked very good until late in the afternoon, but as the market closed with the Nasdaq somewhat in the red our current Long gain was whittled back to 1.88%. And now, for Thursday, we are once again going Short. As always, we explored model enhancements that might have justified staying Long, but based on our indicators we were unable to come up with anything that would keep us Long ... without seriously degrading our back-tested performance. So, Short it is.
Note that our current Long gain of 1.88% is well in line with our back-tested figures for the Voted QQQQ Signal, where Long gains tend to average between 1.65% and 1.83%. In other words, our algorithms force us to be content with relatively small, but hopefully steady gains.
Model Observations (Tuesday, 3/11/08). As it turned out, it made little difference whether we were Long or Short on Monday – as long as we were Long on Tuesday; if we 'had' shorted on Monday, then we would have hated this morning's Open, and it would have been difficult to switch to a BUY when the market opened so high. So, all in all we did about as well as we could have hoped. Also, our model (after another day of optimization) now once again sees Monday as a “Long” – our posted signal for Monday. Our most recent trade now has a gain of 2.17%.
Model Observations (Monday, 3/10/08). As is often the case, our QQQQ Voted Signal model now retroactively 'sees' Monday as a Short. This is pretty typical behavior when we have poorly sampled regions, that is, combinations of indicators that have occurred very rarely during our back-testing interval; the model 'learns' a bit more about that region, but often after-the-fact. So, we now have a -1.53% drawdown on our recent Long, but since we are maintaining the Long position into Tuesday we have an opportunity to knock this down a bit ... hopefully.
Model Observations (Friday, 3/7/08): Our Long signal worked satisfactorily on Friday, racking up a gain of 0.36%. Note that our “Exit” did not trigger (QQQQ Open -2.2%) on Friday, although if we had been clairvoyant we would have held our Short until QQQQ had dipped significantly prior to rising near the Close – but there is no way to do this!
Model Observations (Friday, 3/6/08): Our Shorting signal was just the ticket today, racking up a gain of 2.14%. Since we are switching back to a Long for Friday, however, this gain won't be finalized until we get the Open price. Going back in time our recent track record is: (L) +0.23%, (S) -1.39%, (L) -1.21%, (S) 1.67%, (L) 1.36%. So, for the past 6 trades we made gains 4 out of 6 times (a 67% trading accuracy), and our net gain is 2.80%. This is 'OK' performance, but it would have been much better if we had refrained from trying to 'improve' the model by making minor adjustments whenever it went against our 'gut feel'. For the time being we are keeping our hands off and letting it do its thing without any second-guessing.
Model Observations (Wednesday, 3/5/08): Our previous Short lost some money, but so far our 1 day Long is up 0.30%, and hopefully we can gain a bit more if QQQQ gaps up at Thursday's Open ... at which point we will once again go Short. We expect a good-sized gap up based on our #L parameter, but we are fairly confident that the market will then steadily lose ground.
Model Observations (Tuesdsy, 3/4/08): Switching to a Long (erroneously, according to the newly optimized model) on Monday set us up for a bit of whipsawing, although that is a fairly rare occurrence with our thermodynamically-based model. The Short on Tuesday hurt us, of course, because we not only came in 'Long', but Cisco's announcement caused a late-day rally that brought QQQQ back into positive territory. There isn't much we can do about it now, but we have our fingers crossed as we switch back to a Long for Wednesday.
Model Observations (Monday, 3/3/08): Fortunately, our new Long signal didn't do much damage; our previous 1-day Short closed out this morning with a 1.67% gain, and the new Long left us with a -0.58% drawdown with or without our 'optional' Stop. The 'stop', triggered at the Open price of QQQQ – 0.615%, had no effect since the exit price was the same as the Close price.
However, we are reverting to a Short for Tuesday – and the 1-day Long for Monday turns out to have been 'spurious'; we knew that the call for Monday was balanced on a razor's edge, and allowing our Voted QQQQ Signal model to optimize for many more hours ended up with it finally deciding that Monday should have been a continuation of the Short. 'Should haves' don't count, of course, but it is nice to see the model so finely adjusted to current market realities.
Observations (Friday, 2/29/08): Our Short call proved to be correct, although we would have preferred selling off prior to Thursday's Close. However, life is never that easy. Our Shorting gain is nonetheless at 1.60%, and we are switching back to a Long for Monday.
Model Observations (Thursday, 2/28/08): Our drawdown crept back up slightly today, and is likely to be even greater when we exit from our Long position at the Open on Friday, 2/29/08. Our current drawdown for our extended (1+ month Long) is -5.47% (no Stops) or -3.27% (Stops).
Model Observations (Wednesday, 2/27/08): Our signal today worked well, and our Long drawdown was reduced a bit more. Our 1+ month extended Long drawdown is now at -5.09% (no Stops) and -2.89% (Stops).
Our portfolios continue to do well; our P1N (see PORTSTAT) is up 55.6% since May 2007, and P2N is up about 39.1%. Both figures, however, are based on transactions at the Close price ... and thus only approximate actual gains, with the approximation becoming more accurate as the time span increases.
Model Observations (Tuesday, 2/26/08): Our QQQQ Voted signal did well today, reducing our current Long drawdown a bit more. However, our 'optional' stop was triggered when QQQQ fell to $43.37 ... one penny under the Stop setting of $44.38. While we are tempted to ignore this as a situation in which the average trader would have noticed that QQQQ only briefly fell below the target figure and then rose, the fact is that a Stop is a Stop. On this basis our Stop would have cheated us out of 1.59% of gain ... giving us current drawdown figures for the past 5 weeks of -5.59% (no Stops) and -3.37% (Stops). Notice, however, that the Voted Signal report has now revised its Stop criterion to 0.643% (Open price of QQQQ – 0.643%), and this slightly wider tolerance would have avoided being stopped out today. We have an identical Stop ('optional') in place for Wednesday.
Model Observations (Monday, 2/25/08): Our QQQQ Voted Signal model proved rather accurate today, and the drawdown on our protracted 1+ month Long was reduced a bit further.
Model Observations (Friday, 2/22/08): Our 'optional' protective stop was triggered on Friday, and for the first time in quite a while produced a net loss for the day (-0.64%). For our recent 1+ month protracted Long period this now gives us a drawdown of -6.47% (if NO stops had been used), or -1.98% (if our optional Stops had been taken). Nonetheless, over this period our model has been steadily improving, and we expect its performance to continue to improve incrementally as time goes on.
If we compare our QQQQ trading performance versus a 'Buy and Hold' strategy (confirmed by the TimerTrac(TM) graphs available by clicking the icon on our website), we see that the trading gains resulting from use of our standard signal (with NO stops) are up 3% for the past 6 months, versus a -7% LOSS for a Buy and Hold strategy. For the past 3 months, the figures are a -1% Loss (our signal) versus a -12% Loss (Buy and Hold). Although we don't have independent verification of our signal-with-stops like we do for our standard signal, the history.htm Report is a very accurate way of estimating its performance. If you examine the figures from 11/19/07-2/22/08 you can see that for this 3-month period our standard gain is 0.94%(non-compounded) versus 10.66% (noncompounded) for our signal-with-stops. Since our TimerTrac statistic (-1.0% Loss) is time-lagged by 3 market days, this correlates pretty closely with our estimated 0.94% gain (including the extra 3 days), and helps confirm that our 10.66% figure is pretty reliable as well. Besides, our subscribers help ensure that these numbers are accurately maintained; if we should accidently err on the side of making our results look better, then such errors are quickly pointed out to us :)
PORTFOLIO Performance (5/4/07-present): Looking at the portacts.htm Report we see that our portfolio winners (our Grail System stocks/ETFs) for the past 9+ months have been the P1H and P1N-P5N portfolios. The “H” portfolios don't look very good because they are still working off some major drawdown that they incurred last summer when they shorted very aggressively (before our Voted QQQQ Signal had become mature), but the P1H (holding a maximum of 1 stock) has managed to move up 14.48% during this period nonetheless. For the “N” (normal) portfolios the 9+ month gains are:
P1N 47.88%
P2N 32.68%
P3N 7.70%
P4N 18.45%
P5N 7.06%
Some of the larger portfolios have done decently as well: the P8N is up 10.02%, and the P10N is up 8.36%.
The “U” (ultra-conservative ETF portfolios) are up only 2-2.5%, while our problem portfolios (the “C” and “E” portfolios) are still rather negative, although rapidly digging themselves out of their holes as a result of algorithmic changes made several months ago.
Remember that these performance figures are NOT quite kosher, however; they are based on a simplified calculation that assumes that the stocks are bought or sold at the current Close price rather than the next day's Open price. This assumption is reasonable when longer periods of time are considered since a stock is about as likely to 'gap down' as it is to 'gap up'. By using this method, however, our algorithms are much simpler, and stock splits are easily handled.


Model Observations (Thursday, 2/21/08): Our 'optional' protective stop hit today, and would have saved about 1.29% (the Open was at $44.36, our 0.615% stop point was at $44.09, and the Close was at $43.52). Our standard protocol if these stops are taken is to close the position out at the trigger price (in this case $44.09) and re-buy just prior to the Close (in this case $43.52). In our recent 1-month “Long” interval, our drawdown is now -6.84% (if no stops had been used) ... or -2.41% (if Stops had been employed). Going into Friday we remain “Long”, and once again with an 'optional' protective stop set at the Open price of QQQQ – 0.615%. Our estimated probability for success on Friday is 75%.
Our Voted QQQQ Signal model continues to slowly evolve as we occasionally add special case logic to 'force' the signal in the direction that we 'think' it should go – but always based on our complete set of indicators – and only when so doing improves (or leaves invariant) our complete 5.5 year back-testing history. We have been more prone to make model extensions when the signal wants to go Short ... and especially when we have a Long drawdown that we are trying to work our way out of. Currently, however, our model stays long over 62% of the time, and this is probably as high as it is ever going to get; remember that we 'believe' that the optimal number is 61.8% (the Fibonacci Ratio). Furthermore, our model back-tests at a trading accuracy of about 79+%, and once again it appears that this is as good an accuracy as it will ever be possible to achieve. The bottom line is that we are about ready to cease making ANY tweaks to the model, or if we do, we will try to set a close Stop in the event that we have nudged the signal in the contrary direction. There is no way to avoid making continual changes to a model (even if this just consists of daily re-optimization) because the market itself continually changes. Only a model that can adapt to changing conditions can ever hope to have real predictive power.
Model Observations (Wednesday, 2/20/08): Wednesday was a reasonably 'normal' day; our signal proved correct, and our drawdown was reduced slightly.
Model Observations (Tuesday, 2/19/08): Our signal remains a BUY for Wednesday, although our model has now retroactively decided that Tuesday should have been a SELL(Short). Considering the wildness of the day it is not surprising that the model has refined its predictions and consequently changed its mind, and the fact that the model now back-tests at almost an 80% trading accuracy lends credibility to these occasional fine adjustments. The fact that QQQQ ended up lower on Tuesday, while SPY and DIA ended up higher, shows how difficult it was for the model to decisively 'call' the outcome.
Model Observations (Friday, 2/15/08): Friday was not good for us, but not so bad either; our drawdown increased only slightly, and no 'tweaks' to our model are warranted.
Model Observations (Thursday, 2/14/08): Today Bernanke took the wind out of the sails of a pretty nice rally; we don't believe that our QQQQ Voted Signal is to be faulted, and although our drawdown has once again increased somewhat ... it remains in an 'acceptable' range.
Model Observations (Wednesday, 2/13/08): Our signal (QQQQ BUY) proved to be quite correct on Wednesday, and this has now reduced our combined drawdown for our recent 1-month Long (1/14/08-2/14/08) to -3.97% ... OR -0.82% if all posted 'stops' had been executed. Given the extreme variation in the market during this period we are quite satisfied with this level of performance. Notice that our model possesses many ideal attributes: (1) it doesn't trade too often, (2) it doesn't whipsaw, (3) it sets reasonable 'stops' that actually WORK, and (4) it doesn't overreact to scary market drops, nor does it become euphoric when the market seems irresistibly strong; it keeps a steady hand on the tiller at all times.
On Tuesday we made a significant improvement to the tuning algorithm for our Voted QQQQ Signal: (1) the penalty function optimizes not only the overall performance for the past 5.5 months (since 8/16/02), but also the recent performance (for the past 12 months), and (2) the penalty function tries to keep the Long% figure (the percentage of time that we have a BUY signal) at 61.8% or above – relecting the Fibonacci Ratio. These two changes should help stabilize our model, and ensure that it doesn't deviate much from these 'ideal' characteristics during the tuning process.
Model Observations (Tuesday, 2/12/08): Today our signal was less than perfect ... getting the sense of the market correct (DOW and S&P up), but giving back some of our gains on QQQQ. Nonetheless, our protective stop would have saved us 0.54%, getting us out at $44.06, and back in at the closing price of $43.82. Our 'optional' Stops continue to give us a higher level of performance... saving us a full 3% during the course of our recent “long” interval.
Market Observations (Monday, 2/11/08): Our signal was proven correct today ... including the prediction that the 'techs' should outperform the rest of the market.
Model Observations (Friday, 2/8/08): Our QQQQ signal proved quite correct on Friday, giving us a solid gain despite weakness in other sectors.
We decided to recalibrate our QQQQ Voted Signal model over the weekend because it was obvious that it was gradually tuning itself towards more frequent signal changes ... with an actual decrease in trading accuracy. This is the first time that we have seen this behavior, but we now have an explicit procedure for keeping the model 'on track'. You see, we have determined empirically that the percentage of “Long” days should be approximately 61.8% (the Fibonacci Ratio), and that the maximal trading accuracy for QQQQ trades (Long and Short) should be close to 78%-79%. When our model begins to deviate from these statistics, then it is time to 're-tune' by using a previous 'baseline' model and re-starting the optimization process from that point. Note that although a trading accuracy of 78%-79% doesn't seem that great at first sight, it is in fact a superb figure. In fact, if the number were much higher then we would suspect it ... figuring that there must have been some error in our back-testing procedure. We doubt that accuracies above 80% are possible – with any timing model!
The current QQQQ model has an average trading accuracy (back-tested over 5.5 years) of about 77%, produces (back-tested) annualized gains ranging from 225%-244% (depending upon the use of our optional Stops), a 2008 YTD QQQQ gain ranging from 27%-35% (theoretical ... based on back-testing), an average Long period of 3.55 days, and an average Short period of 2.21 days. Notice that the Ratio of Long/Short periods is 1.61 – almost exactly the Fibonacci Ratio. These facts give us confidence that our model is, in a sense, 'perfect'.
Without our Stops (but 'with' our non-optional market EXIT at $44.84 on 1/25/08), our drawdown for the recent Long is at -6.65%. “With” our optional Stops, however, our drawdown would be only -4.04%. This is still bigger than we would like, but it is an 'acceptable' figure. Bear in mind that the market remains in a dangerous state that makes even the best of timing algorithms look crappy. Our Mutual Fund Timing Indicator has been in a SELL state since 1/2/08; our Market Color Code has been almost solidly RED since 12/27/07 ... with only a few days of ORANGE (another 'dangerous' color); our MTI value has been less than 1.0 since 12/27/07, and has gone to zero (and negative) for much of this time. Despite these obstacles, our objective is to try to generate an accurate QQQQ signal 'every' day. It can be frustrating trying to trade such signals during weak market periods, however, and there are obvious ways to minimize risks and reduce the stress of daily trading:
(1) The safest way to proceed is to trade QQQQ only Long, and only when the MTI value is >= 1.0 (and the Market Color Code is usually GREEN or BLUE).
(2) If you are going to trade when the MTI is less than 1.0, then you should minimize your use of margin (especially when Shorting), and you should consider following our 'optional' protective Stops and Profit Targets.
(3) Also, even when trading QQQQ Long, it is not a bad idea to keep an eye on the Allocation Vectors and avoid being 'too' Long.
Bear in mind that the use of 'Stops' is often the better solution to a declining market than going Short. In other words, by setting Stops your daily losses on a QQQQ Long position are kept to a minimum, while at the same time you are able to stay fully invested ... and poised to take advantage of a rebound. Going Short may 'seem' like a good idea at such times, but it is much more hazardous. Our QQQQ Voted Signal (voteqqqq.htm) is pretty astute; it 'knows' when to play the Long side (with Stops) ... and when to go Short. We are currently investigating the merits of a possible 'tweak' to our Protective Stop logic, however, and this would be to re-buy at the next Open when a Protective Stop is hit, rather than the Closing price – WHEN the MTI value is < 1.0. This strategy has not yet been confirmed, but it would tend to avoid losses when the market 'gaps down' (as it is likely to do under these low-MTI conditions), and would leave you ideally positioned to go Short in case the signal changes direction for the next day.


Market Observations (Thursday, 2/7/08): Our drawdown was somewhat reduced today, but the market action also helped vindicate some of our 'optional' Stops and Profit Targets. Remember that our intra-day Stops and Exits are NOT accounted for by TimerTrac, and in fact we do pretty well without them as the graphs will show ... especially if you limit the graphs to the past 6 months or so when our model became rather mature (we look 'really' good if you set the Graphing interval to the last 3 months).
Model Observations (Wednesday, 2/6/08): The market was doing decently today until an unwelcome comment by a member of the Fed rekindled fears that interest rate cuts were no longer likely. This has increased our drawdown for our current “Long”, which is now back to a painful level. This shows that no timing method is perfect when it comes to eliminating drawdown, but it should be borne in mind that our Mutual Fund Timing Indicator has been in a SELL state since 1/2/08, and that our market color code has been almost solidly RED for this entire period. With MTI values periodically dipping into the negative range, it is almost impossible to make headway at the present time.
Note that according to the TimerTrac service (see the TimerTrac medallion on our web site), our net gain for the past 3 months is about -1%. This is using our 'straight' signal, with all trades made at the Open price, and with absolutely NO 'stops', 'exits', or 'profit targets'. This compares well to a Buy and Hold approach – which would be down about -17% for the same 3 months.
Market Observations (Tuesday, 2/5/08): An adverse manufacturing report sent the market down sharply today. Our drawdown on our recent 'combined' Long is now -6.5%, or -5.32% if our optional Stops had been used (see the history.htm Report). Our optional Stop on Monday would have had us re-buy at the Close on Monday – and that would have been disadvantageous since the market gapped down so much at today's Open. We are considering a strategy change for these optional Stops that would set the re-buy point at the Close (if the MTI is >= 1.0) ... or at the next Open (if the MTI is < 1.0). We plan to run some analyses to see how the strategy might best be adjusted based upon the prevailing MTI value.
Model Observations (Monday, 2/4/08): The market (and QQQQ) slumped today, obviously disregarding our Long signal :) Nonetheless, the drawdown on our 'combined' Long is only at -3.59%, and we would have saved an additional 0.77% by taking the optional Stop on Monday (Open price of QQQQ – 0.615%) and rebuying at the Close ... giving us a drawdown in this case of only -2.82%.
Model Observations (Friday, 2/1/08): Once again the market behavior reflected our signal rather accurately... and further reduced our recent drawdown: our drawdown had reached -5.70% when we made an “EXIT” to cash. Our subsequent re-buy (Long continuation) has now made a gain of 3.57%, giving us an aggregate drawdown of -2.13% for the entire trade.
Model Observations (Wednesday, 1/30/08): The performance of our Voted QQQQ Signal was excellent on Thursday. Yes, the market did retreat after showing strong initial gains in response to the Fed rate cut, but QQQQ did quite well nonetheless ... dropping by only $0.04, and validating our statement that we thought that the tech stocks would do well. Given that it was a 'Fed' day, the volatility doesn't surprise us. Our “EXIT” was not hit, and thus we remain Long going into Thursday.
Model Observations (Tuesday, 1/29/08): Our signal seemed quite appropriate on Tuesday, and therefore there is no need for further commentary on the performance of our QQQQ Voted Signal. Although we are not satisfied with the recent performance of the model (e.g., because of the -7% drawdown that was reached at one point), it is not yet clear what, if anything, could have been done to avoid it ... other than simply staying in cash when the MTI value is zero (or negative).
Market Note: One of the hallmarks of an 'ideal' timing model is that it doesn't whipsaw, and that is one of the outstanding characteristics of our QQQQ Voted Signal model; it does necessarily allow some drawdown to occur, of course, but the model tries very hard to avoid switching to a 'Short' just when a rebound is likely to occur that will reduce the drawdown. Our recently added “EXIT” (to Cash) feature is now a key part of this kind of strategy; it tries to limit Long drawdown by ducking out on the worst of the dips, while at the same time staying in a position to catch a rebound. As a result, our net 2008 gains to date vary from -7.16% to -3.28%, depending on whether our optional stops were NOT used ... or WERE used. This is in sharp contrast to the -14.0% loss that would have resulted from a simple Buy and Hold during this same period (12/28/07-present).

Model Observations (Monday, 1/28/08): So far our “EXIT” on Friday (at the Open price of QQQQ – 2.2%), and our reestablishment of the Long at the Open on Monday, appears to have been a prudent move. Our recent Long drawdown has now been lowered to -5.0%. This gives us a net 2008 gain/loss (12/28/07-present) that varies between -7.16% and -3.28%, depending upon whether our various optional stops were NOT taken ... or were taken. This is in contrast to a -14.0% loss that a straight Buy and Hold of QQQQ would have produced during this same period. So, we are running a net loss for the year ... but the drawdown is a heck of a lot lower than that of a Buy and Hold. Moreover, our MTI has been zero or negative for most of this time, the Market Color Code has been RED, and our Mutual Fund Timing Indicator has been a SELL (since 1/2/08). Thus it is not surprising that it has so far been impossible to make a net gain. During such subzero temperature (MTI) periods, it is a whole lot easier to just stay in cash...
Model Observations (Friday, 1/25/08): On Friday our new “EXIT” logic called for going to Cash at the trigger point of the Open price of QQQQ – 2.2%. This exit at $44.84 avoided the subsequent continued drop, and left us with a drawdown of -5.70%. The Long will 'resume' on Monday when we re-establish the position at the Open price of QQQQ.
Model Observations (Thursday, 1/24/08): Our prediction of an 'up' day for Thursday was borne out; our model is staying Long, and slowly digging itself out of its rather substantial drawdown.
*** New (1/23/08). We have recently added a new kind of 'Stop' to the QQQQ Voted Signal report (voteqqqq.htm): the “EXIT” Stop. This type of “Stop” may occur during Long (Buy) periods when the MTI value is unusually low. The 'trigger point' for this kind of Stop is usually about 2% below QQQQ's Open price, and the idea is to go to cash ... and stay in cash ... if one of these kinds of Stops is 'hit'. Our normal (and optional) protective Stops usually result in a reacquisition of the position just prior to the Close, whereas in these new “Exit” Stops the position will not be reestablished the same day, but 'may' get reestablished at the next Open – assuming that the signal hasn't changed.
Model Observations (Wednesday, 1/23/08): We got the major bounce that we had anticipated based on Tuesday's data, although it didn't do much for QQQQ (which ended up down just slightly for the day). The after-hours action, however, gives us hope that QQQQ will lift further on Thursday, and begin to reduce our drawdown somewhat.
Model Observations (Tuesday, 1/22/08): Our signal has not been perfect in the last few trading days except in one important sense: it doesn't 'whipsaw' ... changing direction a day late and thus incurring losses on both Longs and Shorts. Generally this model will 'hang tough', permitting compensatory market forces to help reduce our drawdown. Moreover, our Voted QQQQ Signal model continuously 'learns'; the current model would have gone short a bit more during the past few weeks, thus eliminating a substantial part of our current Long drawdown. Such retroactive tuning is of little help at the moment (with a drawdown of almost -7%), but it shows that the model is able to switch direction in a nimble fashion .... and potentially do an even better job in the future.
Model Observations (Friday, 1/18/08): A wild market day left QQQQ almost unchanged (down just slightly); it wasn't the kind of a day that we had expected, but what we got was sufficient to provide some validation of our signal. We thus see no reasons to begin second-guessing our model.
Model Observations (Thursday, 1/17/08): Evidently we haven't yet found the bottom, but nonetheless our Voted QQQQ Signal remains a BUY ... in expectation of a strong rebound. Our drawdown is just over -4%, but this remains well within historical tolerances. As we mentioned previously, our model has tuned itself to the point that it now considers Tuesday's market action a 'Short', and so our 'theoretical' drawdown would be lower than what we currently have. So, we haven't spotted any model behavior that we can fault, and so we are continuing to trust it. The tendency of the model to do some altering of the past (resulting from back-testing) is normal, unavoidable, and actually a positive thing since it shows that the model is able to rapidly adapt to changing market conditions.
Model Observations (Wednesday, 1/16/08): Our Voted Signal model (voteqqqq Report) guessed the overall 'long' aspect of today's market correctly; unfortunately, late news resulted in a moderate loss instead of what appeared to be a likely market gain. There is therefore no reason to delve deeper, and we believe that the market will show considerable strength on Thursday ... confirming the upward movement that we had expected on Wednesday.
Model Observations (Tuesday, 1/15/08): Today was obviously not the day to cover our Short and go Long. Admittedly, we did achieve a very slight profit with our recent Short (+0.11%), but we would have greatly preferred staying Short for at least one more day. Interestingly, the Voted Signal was obviously much more finely balanced for Tuesday than we had thought ... and the model currently (after a brief back-testing exercise) shows that Tuesday was indeed still a 'short'. This is obviously no consolation now, but at least it suggests that there is no need to rip apart our model and make major changes. Nonetheless, we are going to analyze our model to see if there is any way that protective stops can 'always' be set when the MTI is below various critical values. In any event, although we were wrong about Tuesday, we were not totally unprepared for a sell-off: (1) our MTI was only 0.2135 (obviously much, much below the neutral value of 1.0), (2) our market color code was Red, (3) our maximum recommended Long allocation was only 34% (for portfolios), and (4) our mutual fund timing indicator has been in the Sell state since 1/2/08.
The safest way to trade QQQQ is to take only Long positions (and never Short), and to be even safer ... to enter a trade only when the MTI is >= 1.0.


Model Observations (Monday, 1/14/08): We were right about the market regaining some lost ground on Monday, and in retrospect it wasn't such a bad move to keep the Short going throughout the day. If we 'had' switched to a Long at the Open, then we would only have gained $0.19 (QQQQ Close – QQQQ Open), amounting to 0.40%; admittedly, that would have been 0.40% saved off the Short, plus 0.40% more gained from a Long ... but, of course, our Voted QQQQ Signal did not call for such an insightful play. Based on over 5 years of back-testing, the signal that we published was most likely the 'best' one in view of the existing market conditions.
Model Observations (Friday, 1/11/08): Our model pretty clearly predicted that Friday would be a 'down' day, and in fact, QQQQ dropped enough in price to put our current Short into the Black.
Technical Note: It is interesting to look at our LSI and SSI indicators (shown each day in our MKTSTATS report). The LSI is our Long Strength Indicator (higher values suggest 'Long' conditions), and the SSI is our Short Strength Indicator (higher values suggest 'Short' conditions). In the last week or so of December our LSI value was running in the 2-3 range, while the SSI was about 0.25. This suggests a 'Long' situation. Abruptly, on 1/2/08 things reversed; since 1/2/08 our LSI has been < 1.0 while the SSI has been >= 2.0 ... and the SSI has now spiked to 3.57 while the LSI has gone negative. This all suggests that the market decisively changed direction on January 2nd.
Model Observations (Thursday, 1/10/08): Our 'profit target' of $47.93 was well chosen for Wednesday, and anyone who exited to cash just before the Close (at the $47.93 mark) would have reduced their net loss on our recent Long trade to -0.97% -- instead of the -2.00% that would have resulted when closing out the Long at Thursday morning's Open price. Even so, our new Short has taken a -1.18% 'hit' as the market tenaciously rose during the day. It is too early, of course, to know just how 'wise' this new Short will turn out to be. Note that we were also right about the fact that shorting conditions for Thursday were likely to be 'poor', and that holding cash was probably a better play. Note also that the 'profit target' of $47.72 for Thursday's Short never came into play because QQQQ opened 'below' that level; while this 'might' have been interpreted as a sign that the Short had 'already' run its course before the Open, we have never performed an analysis along these lines and so we cannot answer this question at the present time ... but it's something we intend to analyze when we get a chance.
Model Observations (Wednesday, 1/9/08): On Wednesday our model proved accurate, and there is nothing further to say. Our ;profit target' of $47.93 was attained, however, and so anyone following that (optional) recommendation would now be in cash ... and prepared to go Short at Thursday's Open.
Model Observations (Tuesday, 1/8/08): Our QQQQ Voted Signal looked very solid until late in the afternoon, but then several news developments killed our upward momentum ... putting the market once more into a sell-off. There is NO way to take account of such things in a mathematical model, and there is thus no reason to try to 'fix' the model to predict the inherently unpredictable.
Model Observations (Monday, 1/4/08): Our Voted Signal model did fine today; although our new Long is off to a weak start, with a drawdown of -0.48%, this is a quite acceptable number ... and we hope for better performance on Tuesday.
Model Observations (Friday, 1/4/08): The QQQQ Voted Signal model obviously worked perfectly for Friday. The thing worth noting, however, is that it is often better to trade QQQQ (when we have a signal change) in the pre-market period (800-930am EST), rather than waiting for the Open – and especially when there is going to be a market-moving news announcement like Friday's Jobs Report. Even if you don't generally trade during this early period, it is highly advisable to be monitoring the market if you have to make a signal change!
Model Observations (Thursday, 1/3/08): Our new Long trade reduced its drawdown somewhat today, but still leaves us with a net loss of -1.84%. A bit of consolation, however, is provided by the fact that our Voted Signal model (voteqqqq.htm) now shows a SELL/S(SHORT) for the period from 12/27-12/31. Since we had done some creative 'nudging' to produce a BUY signal during the 12/28-1/2/08 period, it is good to see that the model has now tuned out our meddling and is doing its own thing. We are really at a point now where it is best to leave the model totally alone ... despite our occasional temptations to get it to flip in the direction that we 'feel' that it should go. The fact is ... that it is smarter than we are!
Model Observations (Wednesday, 1/2/08): Our observation that we had no way of estimating a success probability for Wednesday's Long trade (because similar circumstances had not hitherto come up in our back-testing history) turned out to be prescient. In retrospect, our Voted Signal algorithm has now decided that a Long call was inappropriate for Wednesday, and thus it has 'learned' ... and will thus hopefully avoid similar situations in the future.
Model Observations (Monday, 12/31/07): Obviously the Open was not the ideal time to cover our QQQQ Short. Nonetheless, the new “Long” trade is only down -0.68% ... and the trade continues for Wednesday.
Model Observations (Friday, 12/28/07): Our new Short acquitted itself well, although it made only a small amount of money (0.37% on QQQQ). Now, we have a short-term reversal, and we are going Long for Monday.
Model Observations (Thursday, 12/27/07): The market took a minor 'hit' today, apparently confirming the negativity implied by our L/1 indicator switching from 1 to 0. Moreover, the market situation changed enough today (for whatever reasons) to throw our Voted QQQQ Signal back to a SELL/S(SHORT) – and our Market Color Code to a RED condition.
Model Observations (Wednesday, 12/26/07): Overall it was a pretty good day for us; our QQQQ signal once again proved accurate, and this has pushed our recent Long gains to over 5%.
Model Observations (Monday, 12/24/07): Once again our Voted Signal model has generated a winning signal, and there is really nothing to add.
Model Observations (Friday, 12/21/07): Once again our Voted Signal model has generated a winning signal, and there is really nothing to add.
Model Observations (Friday, 12/20/07): Our new Long signal was amply confirmed today, and there is little to add to that. So far, so good.
Model Observations (Wednesday, 12/19/07): Today we had a near-perfect changeover from a Short to a Long, with the Open price on Wednesday equalling Tuesday's close price. Although we lost $0.01 on the day, the after-market action looks positive and we expect a good day for the market on Thursday.
Model Observations (Tuesday, 12/18/07): The market on Tuesday reflected pretty much what we had forecast. Our (optional) profit-taking target of $49.53 turned out to be a reasonable exit point today, gaining us 0.70% over holding our Short the entire day. In retrospect, now that we have a BUY signal for QQQQ, it would have been better to have avoided re-shorting prior to the Close ... and much, much better, of course, if we had had the foresight to go Long when QQQQ appeared to have bottomed out. But, obviously, such precision is NEVER possible when dealing with the stock market. Our tracking statistics (see history.htm file) generally show both the gains that would have been achieved without the use of any stops or profit targets, and also the delta gains that would have been possible if the stops had been followed.
Model Observations (Monday, 12/17/07): Our shorting signal was clearly confirmed today, giving us a current gain of 2.66%. Our previous Long recently finished up with a 2.28% gain (or 3.43% if stops had been used), and the Short prior to that yielded a 2.82% gain. So, we continue to do well with our QQQQ signal.
Model Observations (Friday, 12/14/07): It took a while before our shorting signal began to look reasonable, but our signal proved to be correct by the end of the day. There was certainly no 'hurry' on closing out the Long, however; by waiting a while it would have been possible to sell QQQQ for better than the previous day's Close of $51.50 (we actually sold at $51.31). However, our tracking statistics (history.htm file) are based on transactions at the Open price, and on this basis our new Short has a gain of 0.23%, and our previous Long finished up with a 2.28% gain (or 3.43% if stops had been used), and the Short prior to that yielded a 2.82% gain. So, we have been doing pretty well of late.
Model Observations (Thursday, 12/13/07): Our current BUY signal seemed reasonable based on Thursday's market action, but we now have a signal change to a SELL/S (Short) state. The justifications for this change are still a bit weak, but after running with a BUY signal for almost a month it is certainly time for a change. In any event, this is certainly a warning to be cautious.
Model Observations (Wednesday, 11/12/07): Give our signal credit for staying Long for Wednesday, although our huge opening gains dissipated considerably as the day wore on.
Model Observations (Tuesday, 12/11/07): A protective stop would have been extremely handy today, but our back-testing studies didn't suggest that one was desirable under these conditions. However, our current Long (QQQQ) is still well in the black, and we anticipate that we will soon regain some of the ground lost today. It figures, of course, that it would be a 'Fed' day that would trip our signal up.
Model Observations (Monday, 12/10/07): Our Forecast was reasonably accurate on Monday, including the suggestion that the S&P and DOW would likely outperform the 'techs' (QQQQ). For Tuesday our MTI value is higher, and we 'expect' that the market should fare well.
Model Observations (Friday, 12/7/07): The market's behavior on Friday reflected rather accurately our weakened MTI value. Since our MTI value for Monday is even lower, however, we are hoping that the upcoming Fed announcement (perhaps reflected in our short-term neural network projections) will counterbalance any tendency for the market to slump.
Model Observations (Thursday, 12/6/07): Our signal proved correct once again, but despite a continued BUY signal for Friday, our suspicion is that we will have to give up at least a portion of our current gains on Friday.
Model Observations (Wednesday, 12/5/07): Our signal proved correct for Wednesday and the Voted QQQQ Signal model (VOTEQQQQ) continues to look very sound.