Power Dip Year-to-Date Results

The eight day rally has the system trailing SPY (+3.62%) and IWM (+4.01%) for the year. Before the rally, they were running near neck and neck. Since PDS buys dips and not strength, an extended, overbought rally can really cause problems as the system will not have much exposure.

The underperformance is not atypical. These things happen. The system does not stay in sync with the market all the time. History has shown that once it hits it stride again (as it did the first few months of the year) it will make large percentage gains in a short period of time.

20% of Equity per Trade

Net % Profit: -0.94%

Annualized: -1.77%

Average Trade: -0.01%

Winning %: 58.14%

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10% of Equity per Trade

Net % Profit: -1.57%

Annualized: -2.96%

Average Trade: -0.06%

Winning %: 58.39%

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ATR Position Sizing

Net % Profit: -1.50%

Annualized: -2.81%

Average Trade: -0.02%

Winning %: 59.29%

.01/share was included for commissions.

A free The Power Dip System trial is available.

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How to grill bbq chicken for perfect results: method 1

1. When ready to grill, brush the chicken pieces with olive oil and place on the grill skin side down. Cover the grill and cook until the skin browns and shows those lovely grill lines, approximately 5-8 minutes. Do keep an eye on the grill in case of flare-ups.
2. Turn, and brush the browned side with barbecue sauce; cook another 5 minutes.
3. Continue to turn and brush with sauce every few minutes until the sauce is caramelized to taste, and the chicken is well done (internal temperature of 160 F). Note: Tomato-based barbecue sauces contain sugar and will burn quickly. If using one, watch carefully and turn frequently at this stage of cooking.

Should you not follow these instructions, see the video below for the humiliation that may result:

[youtube:http://www.youtube.com/watch?v=PFcIjpT-DuQ 550 415]

Or, you can see the actual results.

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I don’t doubt the market’s ability to just keep going straight down here, just like it went straight up, erasing all the recent gains. However, my money is on a bounce.

 

I am focused on the red and green lines. Both are at levels that precede a bounce.

The red line measures the number of stocks trading above their 5 day moving averages. The green line is a decliner’s indicator.

Technically, we look good for a bounce. Fundamentally, with Italy and the Euro mess, who knows. Since I only trade the technicals, I am picking up some longs this morning.

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As planned, I closed my SDS trade at the close.

My average entry price was 20.25. I sold it for 20.57, for a gain of 1.6%. This small gain is nothing to brag about. The only reasons I’m writing about it are because I blogged about entering it-only fair that I blog about the exit- and because I’m not very good at discretionary trading. This trade was managed well, no emotion, no panicking, and I’m rather enjoying the fact that it was well-executed. Perhaps I’ll attempt more in the future.

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Sample size, that is.

I set out this weekend to model the current market action. I sliced it and diced it, looking over the last week to the last few days. Using SPY, I looked back at the last 9 days. I modeled the gap up, doji, and gap down of the last few days. I loosened the criteria to catch more samples. The bottom line is that what we have seen over the last two weeks is not a common pattern. Seeing a 6%+ gain in little more than a week, with all the consecutive up days, and then adding a little gap up, doji, and gap down, is just not something that has happened regularly.

What I am trying to say is that I don’t trust what I am seeing.

I was going to publish some graphs of the various scenarios, but I just do not think there are enough samples to be able to generalize the results.

I am still short, with my position down -2.52% as of Friday’s after-market action. As my position is the double-levered SDS, that could change fairly quickly, and I may still exit with a small loss or small gain. The point is to exit quickly, accepting that either way, the gain or loss will be small. I’m not seeing much of an edge here. Thus, I exit quick, and I accept a small return, or lack of.

If I had to simply guess and ignore my research, I would continue to guess that there is more downside here. That was my thesis on Friday and it is still working for me. If I were to use my research, I would be neutral, to slightly bullish. Again, this is moot because I do not believe there are enough samples to trust.

Anyway, I am taking a vacation day tomorrow from work, so I’ll have time to deal with my short position. Unless something wild happens, I intend to cover tomorrow.

Aside: PDS is giving a few new buy signals, which it hasn’t done for a couple of weeks.

 

 

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Here is my current thinking:

1. The market has not had a decent down day in 8 days.
2. The market gapped up yesterday on ADP’s jobs report.
3. Today’s employment report show only 18K jobs added in June, and unemployment rose.
4. This morning, the market has gapped down.
5. I could cover my shorts for a very small loss right now, but I am not going to.
6. I think the last few days were built on high expectations that the “soft patch” was over.
7. Today’s employment report shows that the “soft patch” may not be over.
8. Therefore, I’m expecting that we may have more than one down day ahead as the market digests these expectations.
9. I will continue to hold my shorts as I believe today will mark the beginning of a pullback.
10. I will re-evaluate at the end of today.

Discuss…

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I took a break from posting High Tight Flags, primarily because there weren’t very many popping up due to the recent market downtrend. Now, of course, they are popping up again.

I started working on how to backtest these, and it is not easy, at least not for me. It has required that I step out of my comfort zone and learn some new ways to use Amibroker Formula Language. It is a work in progress, but some time within the next couple of weeks I should have it complete. Of course there are no guarantees that once I can accurately backtest performance of these that the results will be stellar!

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