Wednesday, 25 March 2009

Tests of Short S&P 500 Stop Levels

Interesting couple of days. My two short positions for my bearish S&P 500 signal have come close to be stopped out each of the past three days. My stop levels are $72.73 for the 200-percent leveraged SDS ProShares Ultra Short S&P 500 ETF and $31.17 for the 200-percent leveraged HSD Horizons BetaPro Bear Plus S&P 500 ETF (trading in Toronto). Good luck for the rest of the week - and see you back here Friday.

5 comments:

Anonymous said...

Hi Alex,

I have just started following your website. I am kind of curious, why are you trading two S&P double inverses that are identical except that one is CAD and the other is US? Have I missed something?

JK

Ariel said...

There was a quick poke just now that may have taken out your stop. I'm showing that price is also testing some important Fibonacci levels this afternoon. I'm neutral on what the market is "going to do" from here but I believe that how it reacts at these Fibonacci levels will be important to subsequent interpretation. So I'm not convinced yet that the markets don't pull back from here, just as I'm not convinced that the markets necessarily put in new lows over the next few weeks.

Alex Roslin said...

Hi JK,

I have accounts with funds in various denominations.

Regards,
Alex

Alex Roslin said...

Hi Ariel,

Yes - unfortunately, both of my positions got stopped out today. At this point, however, the drawdown still isn't large enough to trigger my Black Swan risk-control rule. (See my "How It Works" page for more details.)

For that to happen, the drawdown has to exceed the largest past drawdown seen in the dataset, which starts in 1995 - 19.05 percent. That would happen if the S&P 500 hits 903.43.

If that happens while the setup is still bearish, I would take a four-week breather for this setup. It's my way of controlling risk when it's become clear the market is trading outside recent historic norms.

Regards,
Alex

avocade said...

Video explaining how leveraged ETFs works; good to keep in mind for people new to this:

http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=11868639&src=finance&ch=4535474