Almost 2 Years Since I've Posted...

Two years flew by.  Can't believe I didn't post anything in 2017..oh well back at it now.  Ironically, the last post from April 2016 was that the market was still where it had been for quite a while.  Obviously, its moved quite a bit since then..

After a two year bull market with a few blips of volatility, things are finally getting interesting.  I'm not usually too bearish, certainly not a doom and gloomer, but I'm getting a major 2007 early 2008 vibe right now.  Real estate is too hot, volatility is non existent (except for the last week), interest rates still have to rise at some point (don't they?) and we are due for at least a good hard pull back. Here's the chart that I'm watching on a quarterly basis..

Yep, the yield curve.  I've heard opinions from people that I respect about how the Trump tax cuts are going to propel this market much farther..blah, blah.   And they may be right but I still think it's interest rates.  I'll post again soon with a more in depth look at what I'm talking about but for the time being, here's the short of it.  The yield curve is flattening.  Short rates have been going up and long rates are not going up much in response.  This is the first time we've seen this in the yield curve in 10 years.  It's the interest rates..stupid.
So what am I doing in response to this?  Raising cash.  I've sold off most broad exposure to the markets and am just day trading and swing trading.  I've got a rent house that is way over valued based on the rental rates that the market gets..so I'm selling it in July when the tenant's lease is up.  Is this a run for the hills scenario.  No, probably not yet.  But I want to have ample cash when things do start moving so that I can a) not get hurt by a sudden sell off and b) have cash on hand to take advantage of deals and trading opportunities.

One other thing that I want to expand on soon is the blow up in XIV and the sudden scrutiny in the "risky" volatility products. It's such a bummer that the etn is going away and I'm worried that regulators are going to screw up VXX, TVIX and SVXY.  Those have been my cash cows for the last 5 years and what stinks is that there's not a good replacement for XIV.  More to come soon on that.

Trade well.

George
TLT

A New Year and A New Direction

It's been quite a while.  No the blog is not dead, I've just been thinking about it and I decided to wait for some new and fresh things before I posted.  My life has taken some good, yet intense, turns over the last few months..hence, the lack of posts.

Coming up..I've got some posts ready that will be appearing soon.  The new direction of this blog has been inspired by a new (updated) direction in my trading, thinking and living.  For starters, my wife and I had our first child towards the end of 2012..that sets everything in a new direction!  Although a blessing, the introduction of child puts lots of things into perspective and trading is no exception.  My trading and philosophy in regards to trading has shifted (not necessarily changed, matured might be a better way to look at it) and this blog will be reflecting those changes.  Posts will be more infrequent..likely 1 or 2 a month but they will be more in depth and higher quality..at least I hope so.

Over the last year, I've been in the process of preparing for a child, building a new business, planning the start of a new business, and intensely defining, testing and systematizing my trading.  I'm glad to say that after years of programming, testing, trial and error and much hard work, my systematized trading is finally coming on line.  It was kind of the perfect storm of events to get me here.

I've been working on quantitative trading strategies for 4-5 years now and over the last year, a few pieces fell into place and some lights clicked on...a transformation if you will.  As I was coming to grips with the transformation, as it's hard to let go of old beliefs and accept new ideas, I read Nassim Nicholas Taleb's new book, Antifragile.  This was kind of the nail in the coffin, as I realized that what I was working towards and trying to explain to business partners, clients, potential clients, family members and anyone who would listen was very much in line with what Mr. Taleb is preaching in his new book.  Fortunately, a man of such genius took the time to layout some very interesting and though provoking ideas in a well organized and thoughtful manner...now people like me get to piggy back on his ideas and explanations to our benefit.  Thank you Mr. Taleb!  Also, note that the Antifragile book is now at the top of my "Highly Recommended Reading" list..even above Market Wizards!

I'll be publishing a post within the next week that breaks down my new trading philosophy in more detail..some come back soon.  The long and the short of it for those that can't wait or won't return is that periods of stability achieved through control will continue to dominate and with that stability will come jumps in volatility and chaos .my trading now takes advantage of that chaos by thriving on volatility.  With politicians and central bankers getting more and more enmeshed in our financial system, this cycle will likely continue and even grow for some time.

In the past, I've always leaned towards trend following and momentum..concepts that do well with falling volatility and that follow the consensus.  It's fun to buy when things are smoothly going up and everyone is happy..however, the returns are highly volatile and inconsistent over the long run.  Before reading Antifragile, I started realizing that the most promising systems that I had were excelling during the worst years..they would under perform in 1998, 1999 and then knock it out of the park in 2000, 2001 and 2002.  Interesting! Same happen in 2005, 2006 then 2007 and especially 2008, they began way outperforming.  It has really shaken up many of my investing/trading beliefs.  Okay, enough of my brief summary, more to come soon.

Hope everyone is having a great new year so far!

TLT

General Update and a ThinkScript Code

I almost let an entire month go by without posting...just a sign of how busy (crazy) my world is right now.  Recently, I opened up a Title Company and that has been eating a lot of my time.  Generally, you won't hear me comment on real estate because this blog is about trading, however, the title company is a play on the overall real estate market.  Here in North Texas, real estate is really beginning to pick up.  Real estate agents are seeing lots of activity on the residential side and commercial spaces are filling back up as well.  The title company seemed to be the most direct way to really profit from a rebound.

On the trading side of things, I've been working on a couple of mechanical strategies that are designed to be traded with a basket of commodities.  Nothing too fancy, a simple trend following model and a mean reversion model.  The hard work is in determining how to measure different markets to establish which commodities to include in each system and then how to allocate to each system as a whole.  For example, if my measurements are telling me that volatility is steadily declining and certain commodities are trending, then I may allocate 65% of the overall portfolio to the trend following system and 35% to the mean reversion.  Sounds easy enough, but developing and testing rules is a tedious process.  I'll be providing some posts on this is the future.

Over the past month, I've been in talks with a local hedge fund manager that runs an options trading fund.  He has an interesting strategy that returned about 7% this month...generally he targets 1-2% a month but the volatility in the beginning of April really helped him out.  We are working out a deal that involves a couple of entities partnering up to form a new fund that trades a "Collared Dividend" Strategy.  If this comes together, the new fund looks like it will have $30-50 million to trade by the end of July.  At this point, this might be a pie-in-the-sky dream because there are many working parts that still need to get figured out...but, the thought of managing some institutional money sure is exciting.  

Before I sign off, lets take a quick look at the market.  Below is a chart of S&P 500 via SPY, and it has my Spec Stocks Indicator attached to it.  The premise is pretty simple:  select 6 stocks that are popular and speculative and take a measurement of the trend for each stock.  Then put it together and take an average of them.  These stocks tend to lead the market and be indicative of investors' willingness to take on risk.  Here's the chart:

And for any thinkorswimmers out there, here is the ThinkScript code:

//

declare lower;

input symbol1 = "aapl"; 

input symbol2 = "goog";

input symbol3 = "bidu";

input symbol4 = "cmg";

input symbol5 = "nflx";

input symbol6 = "pcln";

input malength = 200;

input malrlength = 5;

input shortmalength = 50;

input longmalength = 200;

def S1 = close(symbol1, period = "Day");

def S2 = close(symbol2, period = "Day");

def S3 = close(symbol3, period = "day");

def S4 = close(symbol4, period = "day");

def S5 = close(symbol5, period = "day");

def S6 = close(symbol6, period = "day");

def ma1 = ExpAverage(s1, malength); 

def ma2 = ExpAverage(S2, malength);

def ma3 = ExpAverage(S3, malength);

def ma4 = ExpAverage(S4, malength);

def ma5 = ExpAverage(S5, malength);

def ma6 = ExpAverage(S6, malength);

def MALR1 = linearRegressionSlope(ma1, malrlength);

def MALR2 = linearRegressionSlope(ma2, malrlength);

def MALR3 = linearRegressionSlope(ma3, malrlength);

def MALR4 = linearRegressionSlope(ma4, malrlength);

def MALR5 = linearRegressionSlope(ma5, malrlength);

def MALR6 = linearRegressionSlope(ma6, malrlength);

def MALRMAShort1 =expAverage(MALR1, shortmalength);

def MALRMAShort2 =expAverage(MALR2, shortmalength);

def MALRMAShort3 =expAverage(MALR3, shortmalength);

def MALRMAShort4 =expAverage(MALR4, shortmalength); 

def MALRMAShort5 =expAverage(MALR5, shortmalength); 

def MALRMAShort6 =expAverage(MALR6, shortmalength); 

def MALRMALong1 = expAverage(MALR1, longmalength); 

def MALRMALong2 = expAverage(MALR2, longmalength);

def MALRMALong3 = expAverage(MALR3, longmalength);

def MALRMALong4 = expAverage(MALR4, longmalength);

def MALRMALong5 = expAverage(MALR5, longmalength);

def MALRMALong6 = expAverage(MALR6, longmalength);

Def BuySell1 = if MALRMASHORT1 > MALRMALong1 then 10 else -10;

Def BuySell2 = if MALRMASHORT2 > MALRMALong2 then 10 else -10;

Def BuySell3 = if MALRMASHORT3 > MALRMALong3 then 10 else -10;

Def BuySell4 = if MALRMASHORT4 > MALRMALong4 then 10 else -10;

Def BuySell5 = if MALRMASHORT5 > MALRMALong5 then 10 else -10;

Def BuySell6 = if MALRMASHORT6 > MALRMALong6 then 10 else -10;

plot SpecScore = buySell1 + buysell2 + buysell3 + buysell4 + buysell5 + buysell6;

plot zeroline = 0;

assignPriceColor(if specscore > 0 then color.green else if specscore < 0 then color.red else color.blue); 

//

Have a great weekend.

TLT

So What's New with the Market?..not much

Prices have literally chopped back and forth for months now.  This has been a very difficult market environment for lots of traders and investors and I've not been an exception.  That being said, there are still plenty of people that are actually making money in this.  They are the ones who have adapted to the volatility and lack of follow through.  They are suspicious of any rally or sell off and  book profits quickly into momentum..something that's easier said than done.

Personally, I've found the swings in the currency market to be easier to track and trade than the stock market.  I am holding a couple of longs and will put on some shorts if this market breaks down but other than that, I'm letting the stock market play out and prove itself a little before I get committed to either side of the market.

Good luck out there.


TLT

I'm Back: Been on Vacation

Been traveling for the past couple of weeks and obviously I haven't updated the blog in a while.  It's just as well since the market continues to chop back and forth, which doesn't really work well for my trading.  My wife and I were in Greece and a handful of other countries and it was a very interesting trip.  It was especially interesting to speak with Greek people about their country's problems and get a feel for their views and perceptions of the issues their country is facing. 

I'll start regularly posting again in a couple of days..I need to get my feet back on the ground here at home and then dig into what's been going on in the markets while I was away.  Fortunately, I was able to loosely keep up with the overall markets via BBC and sometimes Bloomberg TV, but I was not able to get on the internet very much. Be back soon with some thoughts on trading and market commentary.


TLT

Sell and Sell Short...Maybe?

The market sold off hard today and the move happened on higher than average volume...this is significant. Several things happened for me as a result of today's action. First, I got stopped out of my TBT trade, which is not a big deal as taking losses is part of trading.

Second thing that happened is that I cashed in on my single biggest one day percentage gainer ever. Yesterday I bought some Vix call options (May 10 with a 19 strike). Today those call options were up over 200%...I rang the register at the 100% mark. This was a good trade but I must admit, I got lucky on the timing. I thought that the Vix might spike between now and May 10 (obviously b/c I bought some calls) but I did not expect the Vix to spike 30% in one day! This trade more than made up for the small TBT loss.

Last but not least, I established a short in financials yesterday via SKF. This trade is showing some potential as it's already up a decent amount and I've moved my stop up to above break even. Once again, I lucked out on timing on this one too. The big question now is, "Will we see any follow through to the downside?" Dip buyers have been coming into the market over the past few months and this dip might just be another buying opportunity for them. I have a feeling that we might see a little more of a correction on this round, but you never know.

There are a couple of things that I track every day, some proprietary indicators that I've been tracking and they are looking bearish. The first indicator is called the TLT Oscillator. It's just an oscillator that represents the general market. It ranges between -60 and +60 with 60 being a raging bull market and -60 being a major bear signal. Here's the chart showing the values from March 1, 2010:As you can see, today's reading was a +8...not terribly bearish. The thing that caught my eye is the drop...it dropped 20 points from yesterday (+28 to +8). The big sell short signal will be a drop below zero, so until then, shorting will be done in a more cautious manner and very stock/sector specific.

So I've determined that I want to be stock/sector specific and I've already mentioned that I'm short financials..how did I determine financials? Because I track buy and sell signals on the daily, hourly, and 15 minute time frames for 10 sectors and 30 stocks (3 stocks per sector) every day and financials are where the weakness is at. Here's a look at today's trend sheet for the sectors and stocks..note the sell signals in financials:I've got a couple of other indicators that I'd like to share but it's late and I've got to go to bed. We'll get to some others later but for now..be careful with the longs but don't get too aggressive on the short side either.

Hope everyone's having a great week so far.

TLT

Not a Good Week of Trading..at least for me.

I was on a roll for about 3 weeks. We've all been there..the times when you don't have to take many losses because almost everything you touch goes your way. Well that finally ended for me and it ended this week. I traded 3 out of 4 days (was stuck in court all day Wednesday) and lost money on all three of those days. Fortunately I'm not down a whole lot, but it's still rough to have that kind of a losing week.

Times like this are when a trader has the opportunity to become a good trader or at least a better trader. Continuing to follow a plan, take trades, and stay confident that profits are on the way are the types of behaviors that set apart good traders from regular (loser) traders. As I was reviewing today's and this week's trades, I pulled up an hourly chart of the S&P Emini futures for the week. Upon looking at this chart I thought, "no wonder I got chopped up this week, the market has done nothing but chop around." I knew it had been choppy but it really sunk in when I looked at this chart. So what now? I continue to trade but note that I've been out of tune with the market lately and adjust my trading accordingly by booking profits sooner and trading smaller until profits pick back up. For the most part, my bread and butter trades are intra-day break outs. The best money makers are usually within the first 45 minutes of the trading day. On days or weeks when there is very little volume and follow though, break out trades either fail or they don't offer up as much profit. Although I recognized that it was a poor break out trading week, I failed to alter my trading to minimize my losses...I did cut back some but now that the weeks over I realize that I should have cut back much more. Recognizing these types of things through journaling, blogging, or record keeping is how we learn and grow.

Despite it not being a profitable week of trading, I feel like there was something to be learned and I'm taking advantage of that because that is all I can do. As traders we must strive to improve or else we have already lost.

Have a great Easter weekend!

TLT

The Market Continues to Chop

The chop fest continued this week as the major indexes, in particular the S&P 500, has failed make a meaningful move. We tested the highs of the range last week and briefly broke out but to no avail as the rally quickly sold off and the S&P retested the lows of the channel. Here's an hourly chart, note the choppy action of the wide volatility stops:Maybe we'll see a break one way or another next week...until then there's not much to do but to maybe fire off a few quick day trades and book profits pretty quickly. The swing trade in UTX got stopped out, barely, but out none the less. The only position that I'm currently holding is a trade in JNJ that I'm trailing a stop on. JNJ has had quite a run lately but who knows how much move is left...I'll let the market get me out.

As you can see, I haven't posted much in the past week or so. Mostly because there's not much to post but also because I've been incredibly busy with the law work. I'll be in court for a civil trial Monday and then will probably start posting more regularly after that. Hope everyone's had a good week.

TLT

Long Arch Coal

Victory! Despite a very good presentation by the plaintiff's attorney, we were able to ward off the civil claims against my clients and leave the courtroom victorious yesterday by a unanimous jury verdict...although we did not win our counter-suit, but that's not surprising, especially since we really only filed a counter-suit for leverage against the plaintiff. It appears that the market continued its nose dive while I was in court yesterday and the market was pretty oversold going into the open this morning.

I opened a little position in Arch Coal (ticker ACI) this morning at the open. This is a stock that I've had on my watch list for a couple of weeks and I've been waiting for it to hit oversold levels. I told myself last night that I would go long ACI if the market opened in the positive today, which it did following this morning's GDP report. Here's the ACI chart:
We'll see how this one goes...the whole market seems a little shaky right now, which probably means it's a good time to open a new long position. I've still got a position in FCX along with a couple of energy plays...name of the game is commodities for the time being.

Have a great day.

TLT

Preparing for a Jury Trial

I have a jury trial set for tomorrow. This trial has taken quite a bit of time away from trading this week and I'll be out of pocket for at least tomorrow and possibly Thursday. I have closed out a couple of open trades as they hit my stop loss points but I have also opened up a new position as a small starter position. It will be interesting to see if the market continues with this correction or if the dip buyers will appear and keep the "most hated rally" alive.

Wish me luck, this will be a highly contested civil trial and there will probably be some fireworks. I will be representing the defendants who are being sued for 2 different issues, but we counter-sued the plaintiff so we may be able to not only ward off his harassing suit (which is all it is), we might be able to stick it to him at the same time...that will depend on how good a job I do. I'll let you know.

Good luck trading and keep an eye on energy prices, oil stocks look pretty bullish.

TLT

Summertime Slowdown

If you've checked in with this blog lately, you probably noticed that I haven't been posting very much. This seems to be a good time of the year to slow down a little and take care of some other things that need attention. I'll still be posting, just not as frequently.

TLT