Monday, 25 February 2008
Filled! Dumped Silver, Shorted Banks
Just updated my portfolio page to reflect sale of iShares Silver (SLV) based on Friday's bearish signal and purchase of UltraShort Financials ProShares (SKF) based on the bearish signal in the BKX Bank Index setup from the Feb. 15 COTs report. Note to self: the BKX setup flipped back to bullish last Friday, so I'm holding SKF for just a week, then going long on next Monday's open. Looks like the trade's working okay so far this morning!
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39 comments:
Hi
thank you for your response to my silver short query. I was looking for a way to short individual commodities using ETF's and I came across etfsecurities which seemed to have launched a new batch of short etf's . They trade on the LSE. I have left the link below.
regards
Silverharp
http://www.etfsecurities.com/csl/short/
Alex,
Why not trade KBE etf as a better surrogate to the BKX?
Thanks for this excellent educational blog that I follow for some weeks. Today I have a Question:
I would have expected that you not just dump but go short on silver.
At least that was what I expected when reading your Note 33 on silver in opposite to Note 34 on Platinum where you mention that you only follow bullish signals.
Thanks for answering and the great work.
decologne
Hi Anonymous,
SKF is leveraged, plus KBE is long financials, not short.
Regards,
Alex
Hi Decologne,
You're right - the silver setup is based on going both long and short. I normally would follow the short signals, but I also took the banks short trade on the open today, and I need to consider available funds in various accounts.
As well, I mostly trade ETFs and so far nothing to short silver with in North America, though a reader just submitted a comment saying there's one in Europe.
Regards,
Alex
Thanks Alex
for this quick answer.
Could you please clarify whether it is not an option to sell the same ETF when you go short. Why is it important to find a special ETF that goes short?
decologne
Hi again Decologne,
It's not that it's not an option. It's just my own preference.
Regards,
Alex
I'm sorry I wasn't clear in regards to KBE, I meant as vehicle, short KBE, or buying puts.
Hi again,
Sure, that could be another option.
Regards,
Alex
Hi; thank you for the blog. What is your stop loss on SKF? How are you deciding on your stop losses in general since not all of your setups win. Thank you again.
Alex, Hallo,
I am puzzled with your comment about the financial sector - banks.
From your writing, I understand you are short for the week 25 - 29 Feb 2008. But in the table it is noted bullish note for financials starting from 25 Feb 2008. Can you clarify ?
Thanks
Paris
Alex, Big mistake on the silver call. Your system is seriously flawed. Silver will hit $22 very soon. Gold and platinum will not keep up percentage wise. How could you get this so wrong?
Mark F.
Hi Ic and Paris,
For my stop for the BKX setup, please check the Latest Signals table and "How It Works." Everything is explained there. I set it based on the largest past drawdown, which for BKX was 14%. If BKX falls more than that, I will sell SKF.
Regarding the signals for BKX, please refer to the trade delay column for that setup. There is a one-week trade delay for acting on the signals.
Regards,
Alex
Hi Mark,
Thanks for your comment. That signal made 37 percent since last May. That's now in my pocket. Onto the next trade.
Regards,
Alex
Good luck.
DUMP SILVER?!?!? Are you nuts? UP TO 18.81 today and on its way into mid 20's by april... You have to be crazy my man - get a clue about what's going on ! SERIOUSLY - GET A CLUE !
HIOOOOO SILVERRRRRRRRR
AWAAAAAAAAAAAAAYYYY!!!!!!
GREAT CALL!!!
Thanks for your comments! While gold bugs can always be expected to be bullish and to take great offense with anyone who doesn't share their enthusiasm - regardless of the price action - I take the high levels of bullishness of some of the comments here to be a good contrarian warning sign.
Thanks,
Alex
You better take the high levels of bullishness of some of the comments here to be a good contrarian warning sign that you are dead wrong.
There isn't even any public participation yet. When that happens then take it as a contrarian sign.
You know better than Jim Sinclair who said to stop trading? I don't think so and you proved it.
Your "system" needs a serious overhaul.
Thanks and God Bless.
"I take the high levels of bullishness of some of the comments here to be a good contrarian warning sign."
________________________________
For the most part, I agree with that statement. However, during the past 7 years there have been a few instances (they can be counted on one hand, without using all fingers) of large and sustained moves up in the price of Gold and Silver where trading programs have shouted OVERBOUGHT throughout the rise. While it is true that trading programs (such as the one you use which had you sell silver the day before a 4% increase) can result in (overall) good returns, they will very often miss out on the big price moves.
Hi
I have been following Bob Hoye's work recently and he is expecting a serious correction in commodities by end of march he noted that silver is having its seasonal strength in Feb. I was temped to go short silver around now, after selling a sizable physical position in the last week, however one signal I was looking for is a daily swing high or better still a weekly swing high which we didn't get so I stayed on the sidelines, I don't know if you used this signal or back tested to see if would aid your trades. It will be interesting to see if you get a confirmation with gold this week or next and to see if the dollar stays above its Nov low.
Regards
Silverharp
Hi Silverharp,
That's an interesting technical indicator I would have looked for when I was doing discretionary trading. I've tested for some price filters with the COTs data, but so far the setups seem to work best off the COTs data alone. You can sometimes improve profit results, but at the expense of statistical robustness because you're using more trading rules.
In response to the silver bulls, I always find it kind of scary how bullion negatively affects people's emotions in trading unlike any other market. Good luck, folks! If you're looking for a website where all they say is "buy gold," ya came to the wrong place!
This system doesn't have a 100% win record. No trading system does. If you're looking for one, watch that guy on TV who's never wrong. You know who I mean.
And to a few people who resorted to name-calling, please be aware of my comments policy: constructive comments are welcome, but name-callers are not. Get a life.
Regards,
Alex
Alex, Great Call on the Silver sell!!! Did you go short too!! The main problem with your system is that it relies on OLD historical data. We are in uncharted waters, but dont be arrogant about contrarian views you think you have a monopoly on.I think myself a contrarian, and I feel your system is irrelevant in these times, no offense intended. You are so way off on this, you have only heard the beginning as Silver is over $19.05 an oz.@this moment!Good Luck,Sayanora!James B.
My system buys the least favorable metal of the bunch on corrections which a few weeks back was palladium and silver, and holds the rallies. I can tell by the way things are developing my next buy will be gold as soon as silver takes over the spotlight. In the past 8 years this has far outperformed 37%. There is no logical reason to ever sell precious metals in the current global economic situation. If you are selling and re-buying you are wasting commissions, time, spreads and your energy. Buy and hold easily outperforms trading in a bull market. I dont want to call names, buy "sayonara silver" really sounded a bit egotistical, you reap what you sow.
Great call on the silver Alex.
Thanks, Barry
Good job, Alex!
Silver will probably crash very soon (back to 15 or 16$ I think). It is clear that it will happen, according to the "Commercials" in cots reports of the last few weeks.
You took your profits and I did the same (+35%).
Regards,
Louis
Alex,
Being long a substantial amount of silver myself I have been watching a few indicators including your website (great system and ideas - thanks very much for sharing!) to monitor when might be a good time to sell to avoid a typical "silver wipe-out".
I am curious as to whether you checked what your signals would have been during the last big bull move (Sep-05 to May-06) where silver went from 7 to 15? Did they ever hit a bearish signal? If so at which price level?
I am quite bullish too (hoping for gold at 1,200 and ratio between 40 and 50, i.e. silver between 24 and 30 by April-May) but these comments (come on guys, what is the point of devising and testing a system if you are not going to follow it?), my own thoughts and the current price action shooting up scare me a bit... Have I fallen in love with my silver position?? Or should I just learn to hold on to my winners?!
Good luck to you and thanks for the inspiration and sharing.
Dear Alex,
I've noticed that since you've turned bearish on silver prices around Feb.22 that prices have risen sharply and as of typing this today, prices are around $19+. What are the factors that caused this to occur? It's also interesting to note that most commodity prices in general have also risen such as gold and oil. Any insights would be welcomed. I'm not a trader. My skills aren't advanced enough and I don't have a lot of funds. I just buy commodity stocks and hold them for the long term. In your current opinion, are you still bearish on silver prices and do you expect them to fall sharply from here?
Cheers,
Ian
Hi Lardoon,
Thanks for your comment. I appreciate your question. During that period, my setup was long 84% of the time and made 111%, compared to 114% for silver itself. There were four brief periods of being short (six weeks of out 38 altogether during the entire period), which taken together lost about 2%, so that accounts for the shortfall for the setup during that period.
When I've got more of my setups revised, I'll post some tables of running results for some of them to show how they worked over time.
Regards,
Alex
hahahahahahaha, what a call
Hi Ian,
Thanks for your comment. I can't really give any long-term projections because the signals can last a week or a month or more. No way to tell in advance. I also can't say whether prices will fall sharply from here. My setup is based on what's happened in similar past situations, and all that past data iss saying is this is a good-probability trade for a relatively short-term horizon. (The average holding period for a trade in this setup is 7.8 weeks.)
As for silver going up when the signal went bearish, this isn't unusual. Even the best setups I use - and all trading systems in general, whether mechanical or discretionary - have periods of drawdowns and losing trades. I'd love to meet the person who's never lost money on a trade.
To see something interesting, take a look at what happened when my silver setup went to its bullish signal with the May 8, 2007, COTs report. Silver was down for two weeks, then up, then back down into the summer, before breaking out in September.
A few days of a signal going against you is pretty meaningless in that kind of context. If I had panicked two or three days in and sold, there wouldn't have been much point to having devised this system in the first place.
Regards,
Alex
Something else to consider.
Since there isn't a trade delay in the Silver setup, it's totally possible for it to go bullish again next week.
Personally, I don't think so, but it's possible.
If you look at a 2 year chart of the small traders vs the price of silver at http://www.schaeffersresearch.com/cfxtemp/CFT0227_1232311BB.jpg you can generally see that when the small traders start piling in, it's time to take profits.
1 or 2 days do not make a trend.
It will be interesting to see what happens in the next week or 2.
Cheers!
Dave
I agree with those that said this system is flawed. Think about this. If i were a commercial who just sat through an almost 2 year sideways correction, accumulating all the way...why on earth would i be buying now or SELLING now?? I would just hang tight with my stash and watch it rise. Just because they are not buying DOES NOT mean that they are selling. There are enough speculators and common investors to take the trend for a great ride from here. I , like the commercials, have accumulated and now i am watching...enjoying the ride, and when there is a decent correction i will buy more. That is what this system is missing...where are the sellers???
Hi Anonymous,
The commercial traders are the sellers. They are at a specific extreme net short position in comparison with past data that in the past has been a high-probability selling opportunity.
Regards,
Alex
Resistance level of 18.55 was gapped over. Look for a pullback to this level to buy. Next target is 21.47 on continuous futures. After that 26.20...and if that is exceeded somewhere in the 34 range. Happy trading.
Alex,
Silver.
Did the commercials capitulate on Tuesday?
It will be interesting to see your data Friday.
Silver,
Looks to me, Alex, that since Tuesday, the silver shorts got "COT-er-ized".
It is quite funny to go back to this thread now and see some of the comments... when today, Silver is coming back down real fast to around the level where you must have sold off...
As I did not follow your signal, and held my position (I was still feeling happy about that 48 hrs... and 15% ago!).
My strategy was to ride the "Elliot wave 4" and the subsequent wave 5 until the silver top...
That is the plan anyway but a $3 fall in 48 hrs is still hard to stomach... Maybe as much as $3 up while being on the sidelines?
Lets hope your signals turn bullish again (would you mind sharing the MA period and number of std deviations you use for silver?) and I'll definitely keep paying attention to your signals.
Hi Lardoon,
Thanks for remembering! But I have to say I just feed bad for the little guy investors out there who keep getting suckered by those gold bug types. Very sad.
And is it hard to be on the sidelines watching silver go up $3? Honestly, it doesn't bother me one bit. There's always another trade. Can't be wedded to your positions or try to pick exact tops or bottoms. Those are good ways to lose money.
Best regards,
Alex
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