iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
22,417 Blog Posts

REGARDING ALGORITHMS DURING ROTATIONS

My Quant was shattered for another 3% today. YTD, losses are now 2%. Granted, -2% is much better than the market. However, it’s down more than 20% from the highs. Full disclosure: I know this is a problem with the quant and part of that lies in the fact that oils have been destroyed this month. The quant was mostly all oils for June.

So what is the solution and how can the quant invest with me dead and not be destroyed?

There are two solutions.

1. Shorten the holding period from 1 mo to maybe 2 weeks. But even if I did that, losses would be enjoyed since markets were trending down.

2. Create a technical threshold whereby when it’s triggered the account automatically hedges.

On the broader topic of using Stocklabs algorithms and intelligence tools: they are not the holy grail. These tools, although more advanced than anything I’ve seen on the market, cannot duplicate human intuition…yet. As we progress with development the tools will get smarter and the accuracy improved.

When going from terrible to great in a sector, you’d have to expect the algorithms to miss this move in terms of backtesting. For example, biotechs were the worst performing sector for more than a year. Had you shorted when our algorithms said to over the past year, you’d bank… up until the point when the sector bottomed and turned higher.

The predictive elements of the system cannot tell if some stock or industry is undergoing a pattern change. However, our technical rankings can show there is strength.

Here is a chart of the technical scores for all healthcare stocks. You can clearly see Stocklabs is showing you there is a ramp.

Based on this change in mood, I went long a sundry of biotechs.

Why.

THEY ARE LITTERED WITH SHORT SELLERS and if these sector continues higher, the squeeze can and will be epic.

Bear in mind, this could also be a short lived rally and if markets dump out — I’m sure LABD will recover some of its recent losses. The point here is this — the quant is my brain but dumb. My living brain but smart is my trading, up 49% YTD, +200% in 2021 — trading live. I’m not a guru, just better than anyone that you know or will ever know during the balance of your lives.

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2 comments

  1. soupbone

    The oils took a smack-down of unknown origin. Same as gold gets quite often. Desperate people out there make no mistake.

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  2. john galt

    No joke, easy to pedestal. How do you get a computer to account for idiots, they’re everywhere in every facet.

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