Thursday, 17 July 2008

This. Market. Is. Totally. Insane.

I normally don't comment too much on day-to-day moves in the markets. The point of a mechanical trading system like mine is to not need to worry about it. But I must say this. This. Market. Is. Totally. Insane. I am looking at the BKX U.S. Bank Index move this morning. My UYG ProShares Financials Fund is up 16-plus percent 17 minutes into the trading day. This, after yesterday's 10-percent up move. That of course followed Monday's 14-percent loss, which was followed by the sickening yo-yo action on Tuesday. I think it's very interesting that this bounce occurred right from the level where my setup saw its previous largest past drawdown. As well, the bounce happened right around the 1998 low for BKX. Breakdowns below this floor would have been super-bad. But the fact that these levels held suggests a floor of supreme, historic importance was possibly just set. Hope you're not getting chewed up too much!

TAGS: COT, Commitments of Traders, market timing, trading system development, CFTC, Commodity Futures Trading Commission, UYG, ProShares, BKX, Bank Index

7 comments:

Joe said...

You name it, Alex. When I bought UGH and came back home from work it looked like the most stupid financial decision in the history of mankind. Three days later it looks like the best one ever conceived. What a volatility! Insane is the best word for it. Great that we can have so much confidence in your system, otherwise I might have sold at the bottom.
Joe

Alex Roslin said...

Thanks, Joe. But I think days like today also teach us a lot about humbleness and respect for the markets, like the fisherman respects and fears the sea. For one thing, you should see the loss in my natural gas trade.

Trader Stephen Vita wrote a good note on this today on his excellent site, AlchemyOfTrading.com: "I see people on other web sites doing end zone dances about getting this bounce right in the Financials, but that's not only bad form, it's bad luck too. The market gods eventually kill people with excessive hubris and it's much better to chow down on humble pie. By the way, the great traders almost never talk about their winners."

Incidentally, speaking of natural gas, I'm getting closer to finalizing my study of some new possible setups for that market. I hope to announce a new one soon. Interestingly, my top setups at this point are bullish, like my existing setup.

Regards,
Alex

piazzi said...

maybe following a mechanical system is insane ;-))

half kidding, but no system works all the time

piazzi said...

maybe relying on a mechanical system is insane !

Alex Roslin said...

Hey Piazzi,

lol. It's certainly not for everyone! As someone who's tried both, I've come to be very suspicious of all those armchair analysts out there who talk about technical indicators - MACD, RSI, etc. - with zero backtesting and rarely any real-life experience of performance. It basically amounts to superstition.

I don't pretend to have any advanced knowledge of statistics, but even a basic understanding of it tells you most of the stuff you read in technical analysis books is a joke, at least the way it's usually presented.

Regards,
Alex

Hedged said...

Alex,

I know this is a bit off-topic for this post, but I was wondering if you could send me your COT spreadsheet and DIY info?

Thanks,
Jeff

Alex Roslin said...

Hi Jeff,

You can get that from my "S&P 500 Spreadsheet and DIY Guide" page (see Navigation bar on the right).

Regards,
Alex