These stocks were flagged Technically OB today, using our 12 month algos for a 10 day hold.

This data is being hand delivered to you this evening, with a wax seal, from the confines of The PPT. You can thank me later.

GLD flagged OVERSOLD today on all of our algorithms.

Over the past 12 months, this signal has yet to fail when holding for 5 days or more.

One of the edicts set forth by the powers that be at iBankCoin, during the exquisite development of the second iteration of The PPT (BEHOLD the excellency of my prose!) was to establish an evolved version of the Overall Hybrid Score, aka the mean reversion element of the algorithm that flags general market overbought and oversold conditions. Throughout the years, you’ve witnessed these signals with perfect clarity time the market with sublime mathematical precision. Upon the launch of part two of my grande experiment in mathematical precision, three new sets of general algorithms will be added, all to conform to time.

Understand something, price is not enough. In order to properly gauge the market, with all of its eccentricities, one must account for time–because things change, correlations dislocate and reattach, scattered over an undetermined period of time. So, we’ve created 3 month, 6 month and 12 month algorithms to go along with the current 36 month (anything longer than 36 months is mostly irrelevant).

During this period of unprecedented appreciation, The PPT has done well. As a matter of fact, our good friend Ragin’ Cajun published a study towards the end of 2011 highlighting the astounding advantages of trading in and out of leveraged ETF’s– using the overbought/oversold signals. The most difficult part of using mean reversion, in an irrational market, is there are few opportunities to profit from the downside. Moreover, over the past three months, there have been an unprecedented amount of overbought signals registered in The PPT, which only further demanded malleability in the way the algorithm was calculated. It is clear to me, a score of 3.10 no longer represents grave danger, as it once did, just 6 months ago. Nevertheless, over the last 36 months, had you adhered to the glory that is The PPT, you did exceptionally well.

HYBRID SCORE CORRELATING WITH THE S&P 500

Using the OS signals made you money 82% of the time, over 33 separate instances. The OB signals, prior to this recent bout of foam mouthed bullishness, presented a much greater level of accuracy. Nonetheless, at 64% accuracy, within 7 days of a signal, in such a trending market as this one, up over 100% in 3 years, I declare it is more than an edge, but an advantage.

There’s been a lot of buzz these past few days inside The PPT, with regards to our new trading system, using the Overall Hybrid Overbought/Oversold signals to place long and short sale trades. Those who are familiar, the results convey a picture of mathematical brilliance, something I’ve been alluding to for several years.

The rules are very simple. For example, when the algorithm says “oversold” a buy order representing 1/3rd of a position is executed. Another tranche is not executed unless the system flags oversold again. Should the algo go straight to overbought, due to a sharp market reversal, then the buyer will have to suffice with just 33% of his assets invested. No matter what, upon an overbought signal, the entirety of the account must be liquidated and a short sale placed.

In other words, on both the long and the short side, money is allocated in three tranches and liquidated in its entirety upon receiving an OB or OS signal, depending on whether you are long or short.

Here are the results since inception or 2009.

2009: SPY +32.3%, DIG +76.35%, ROM +148.61%, OIH +101.5%, IJR +32.3%, XLB +52.9%, ERX +155%, TNA +84.9%, UYG +28.5%
2010: SPY +18.34%, DIG +56.4%, ROM +84.01%, OIH +61.5%, IJR +29.48%, XLB +39.6%, ERX +97.8%, TNA +123.3%, UYG +31.4%
2011: SPY +12.79%, DIG +52.72%, ROM +18.66%, OIH +16.75%, IJR +24.76%, XLB +23.6%, ERX +71.6%, TNA +65.6%, UYG +12.5%

This is a brand new study and we will be building upon this framework to include highly correlated equities. We have data on stocks like FCX and EXK and the results are similar. When gazing upon this data one thought comes to mind: “Sublime Harmony of Mathematical Precision (SHOMP)”. By the way, that UYG (financials) data is about +50% in outperformance versus the year to date returns of the buy and hold crowd. Indeud.

Spread sheets with details are provided inside The PPT.

In other news, Europe is disappointing again. The Italian meatball at the ECB said, and I am paraphrasing here “we don’ta knowa what the fucka yous a talkin’ abouts. The ECB isn’t doing a shit.”

Get to cash.

The robots are broken. We rallied about 6% inside of 30 minutes today. Soon enough, the HFT fucktard bots are gonna go rogue (No Palin) and bid up the market until the average balance of a short sellers account is negative $1,000,000,000, which incidentally would wipe out the entire banking system altogether. Irony.

Because of the coiled back nature of this market, absent any good news, the possibility for a spectacular single day rally is present. I am not talking about your average, run of the mill, regular shmuck from 0hio trying out finance for a few years type of run. No. I would like to see gold drop $1,000 in a single day at the same time stocks rally 10,000 points, just to shut Jim Rogers and Peter Schiff up–once and for all. The very idea of gold makes me sick.

Many of you are scared because you are weak. “The Fly” is a golden falcon, breaking the necks of migrating birds for sport.

Today over 500 stocks gapped higher by 10% or more. That’s ridiculous. 99% of those gains occurred in the final hour of trade. It’s not possible for this to occur, unless the buying was automated by some magical genie in a server rack. If you are short stocks here or long FAZ, you stand the chance to go from up nicely to negative $1 billion within minutes.

I remain short EXH for sport and will liquidate new longs into strength.

NOTE: H/t to TysonandOne in 12631 for putting my SHOMP on paper.

One of the things we do in The PPT is track performance of all stocks during our OVERSOLD and OVERBOUGHT cycles. This gives me an edge by highlighting median or mean returns for the highest beta stocks traded, with accuracy to boot. The following list of stocks (my gift to you) tend to outperform all other stocks during OVERSOLD to OVERBOUGHT cycles. As a point in fact, PPT members do not have access to this data yet, as it is still in BETA, soon to be released in PPT 2.0.

(Stock, Median Return)
AG +16.27&
LNG +13.8%
HFC +9.6%
EXK +9.4%
CVI +9.38%
GPOR +9.2%
REGN +8.7%
WNR +8.02%
COG +7.8%
MDW +7.7%

The best performing ETF is AGQ with an average return of 17.64%. ERX is 3rd with a 7.44% return. If you want more info, quit being such a fucking piker and purchase membership.

I will be raising cash soon.

Note the intra-day 2.52 level reached today.

This losing week marks the 5th consecutive week of losses for the Dow, something not seen since 2004. For those of you wondering “what the fuck is going on”, hard is what is going on. Life isn’t always easy and the stock market is the quintessential “fuck you, you’re dead” puzzle.

I know you are over there, pulling on a homosexual cigarette, declaring victory over Le Fly. However, as I blow smoke in your face from my Cohiba, I insist “the stage is still set” for a melt up, set to begin on Monday. Starting with Monday’s trading session, I will begin to grind your bones into dust.

It is not a surprise to see the SPY close at exactly 1,300; because that’s what happens when the stage is set. We’ve endured 5 weeks of misery and Bernanke is set to speak on Monday. Over the weekend, the euro fuckers will bail out Greece, effectively destroying the idea of rational thinking—making stocks trade wildly higher, as if coordinated by bi-polar clowns.

Nevertheless, I ended the session down 0.5%, mostly due to WNR. It’s worth mentioning, crack spreads went up all week. One day people will pay attention to the answers and quit asking questions.

In other words, yes, I’m still getting my bow tie on, long inflation related equities in great abundance.

NOTE: Yes, The PPT is finally registering an official OVERSOLD.

The reason why I didn’t sell more today is due to the ferocity of today’s decline, with respect to The PPT‘s Overall Hybrid algorithm. As you know, the system grades all stocks, based on technicals and fundies, using a 1-5 scale. When the rubberband extends to any extreme, it flags Overbought and Oversold signals, which vary in accuracy. However, for the most part, the Overall Hybrid score, when calibrated perfectly, cannot be fucked with or matched by any black box system out there, laughing at the shit you retail idiots concoct and spit on the institutional clusterfucks.

At any rate, two days ago the system flagged Overbought and went into extreme Overbought yesterday, registering the second highest score in PPT history. I was expecting a pullback, but not a broken elevator shaft, “fuck you, you’re dead” catastrophe. The result: a mammoth drop in hybrid score to the tune of 19.91%.

What does this mean?

It means the average stock graded by The PPT had its score sliced by at least 19.91% aka the 4th largest single day reduction in score ever. Your next question is “what happened on previous occasions of large hybrid drops?”

The answers are forthcoming.

9/7/10- Hybrid Drop 23%, SPY @$108.02
9/11/10- SPY @$111.05

4 day net result: +2.8%

6/4/10- Hybrid Drop of 21%, SPY @$105.19
6/10/10- SPY @$107.49

4 day net result: +2.18%

12/1/08- Hybrid Drop 20%, SPY @$78.08
12/5/08- SPY @$83.59

4 day net result: +7.05%

6/1/11- Hybrid Drop 19.91%, SPY @ $131.87
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2/10/09- Hybrid Drop 18%, SPY @$79.65
2/17/09- SPY @$75.92

4 day net result: -4.68%

8/30/10- Hybrid Drop 18%, SPY @ $103.75
9/3/10- SPY @ $109.25

4 day net result: +5.3%

It’s worth noting, on the one negative outcome, the market was up immediately after the big down day and only dropped on the 4th day. And, there are numerous scores of double digit hybrid drops, with an overwhelming net result of higher stock prices, shortly thereafter.

Get your fucking popcorn ready.