I have two different systems, using two different entry methods, that are both signaling that there should be some weakness ahead over the next several days.
Granted the Bamboo is one of the systems, and over the last 23 trades has only been right 47% of the time. However, over the past 90 trades, since November 15, 2007, it has been right 78% of the time.
The other system, which trades less frequently than the Bamboo, is also calling for a reversal. Since November 15, 2007 it has closed 44 trades and has been right 84% of the time. Over the last 20 closed trades, the system has been right 80% of the time.
The methodolgy behind these systems has been tested on other indexes and maintains the general win/loss percentage across longer time frames. Because the two systems referenced in this post trade the leveraged ETFs, some of which are new, testing over longer time frames is difficult.
Two other systems, the VIX Stretch and the CCI System are close to signaling short entries. Another up day on Monday will likely trigger the VIX stretch short entry. A down day on Monday will likely trigger a CCI short entry.
Yet another system, tested back to 1994 on the SPY, is already short. It has a 60% win rate on short trades.
Truly, last week was very bullish. Many traders have noted that the two 90% up volume days in one week suggest real strength. I will stick to the probabilities. I feel very confident that a reversal is imminent and am positioned for it. My confidence should probably be faded… We’ll see what happens this week.